Chicago VC firm MATH Venture Partners not raising a new fund

The firm, which last raised $46 million in 2018, made about 32 investments across two funds, including in Built In, SpotHero, Chowly and TripScout.

“Our original plan was to raise a third fund,” Henikoff said. “Looking at how the markets were doing and how (limited partners) were feeling about their personal liquidity, we felt (not raising) was the right thing to do. I’m disappointed we aren’t able to raise. But if we’re going to do something, we want do it right. We didn’t want to do it undercapitalized.”

MATH is at a challenging point for a venture firm. Most venture funds are structured to last 10 years, which means the companies they’ve invested in are unlikely to have been sold, merged or have gone public. The funds’ returns at this stage are largely based on the public markets, which have tanked. The S&P Technology index is down 25% for the year.

The irony is that venture funds are coming off a record year, raising $130 billion in 2021, a mark they’re on track to beat this year, according to PitchBook. But with fundraising generally taking 12 months or more to complete, it’s a lagging indicator.

“In Q4, we’ll probably start to see the doldrums of fundraising start to begin,” says Kyle Stanford, senior analyst at PitchBook. “There probably will be more funds that announce they aren’t raising new funds. There’s a timing aspect in VC that you can’t really control. If (MATH) went out last year, they’d have been raising in the best market of all time.”

Competition for what likely will be a smaller pool of funding is higher, especially among smaller funds such as MATH. PitchBook says more than half of the 999 funds raised last year were under $100 million.

“Right now there is a little indigestion,” says Steve Kaplan, a professor at University of Chicago’s Booth School of Business. With the decline in the stock market, coming on the heels of new investments in venture-capital funds in the past two years, some investors now find themselves with a higher amount of capital in venture capital than they want. “Everyone is overallocated right now, Kaplan says. “It’s a tougher slog going forward to raise money.”