Venture Capital: 3 Things to Watch for in 2025

On April 24th, Fogel & Potamianos LLP hosts its annual 2025: M&A and Alternative Investment Forecast. We have learned from experience that while it’s difficult to predict the future, the right people can help forecast it. In our pre-panel meeting with panelists Cesar Bello, Partner with hedge fund Corbin Capital Partners, Jason Somerville, Partner with investment bank GW Hahnbeck, and Robert Dalie, Managing Director of wealth management firm The Summa Group of Oppenheimer & Co. Inc, several insights emerged:

1. Fundraising cycles are taking longer – but not for all products. Even for the most qualified of fund managers, especially emerging VC managers, fundraising cycles are being pushed out, up to 18 months. This means that capital is not going to work in the markets as quickly as it once was. In addition, with fewer IPOs and exits, there is less liquidity available for LPs, who then in turn have less funds to recycle into successive funds. That said, there are hot alternative asset markets, such as private credit that are raising funds without missing a beat. Private credit is not going anywhere, as we are in a higher for longer interest rate environment.
2. Funds are stricter with their investment theses. In the frothy market of 2021 funds were investing outside their investment thesis and stage since there was an abundance of capital and competition for deals. For example, a fund that focuses on Series B and C investments in consumer products may also have made early-stage investments in pre-seed and seed tech. Institutional limited partners (LPs), in particular, have taken a more active role and prefer to make their own allocations. As a result, they are encouraging funds to provide greater clarity regarding their investment thesis and the stages of investment they pursue. That said, blue chip funds with billions under management have the ability to launch different funds addressing different theses and investment stages to solve for this issue.
3. Uncertainty is a force against action. In an uncertain regulatory environment (e.g. tariffs, antitrust, tax), decision makers can fall into a holding pattern, rather than take action, as they wait for clarity.  For example, a new tax regime that eliminates capital gains treatment of carried interest would force fund sponsors to think outside of the box, including choice of formation jurisdiction, recharacterizing and timing of carried interest, and use of alternative structures (such as trusts and blocker corporations) to reduce tax liability. We expect to have more clarity after the first quarter on some of the aforementioned items, but the reality is that while there is optimism for 2025 versus the last few years, full clarity may never come. There will still be ambiguity to work through.

Jerome Fogel is co-founder of Fogel & Potamianos LLP. A partner in the Corporate Practice Group and Chair of the Sports & Entertainment Group, he is known as an innovator and dealmaker in the legal community. He represents private companies in mergers and acquisitions, emerging venture funds from formation through deployment of capital, and sports superstars in their off-field transactions.

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