HomeUSAFairview Capital Releases 2023 Market Review

Fairview Capital Releases 2023 Market Review

Fairview Capital, one of the largest minority-owned venture capital and private equity investment management firms in the United States, released its 2023 Market Review of Woman and Minority-Owned Private Equity and Venture Capital Firms.

This annual report offers insights into the growth and resilience of woman and minority-owned investment firms despite significant economic volatility, geopolitical conflicts, and setbacks for diversity, equity, and inclusion initiatives.

This year’s report shows a significant expansion in the universe of woman and minority-owned firms, reaching a new high of 907 firms in 2023, up from 760 firms at the close of 2022. This signifies a significant growth trajectory, as the universe of diverse firms has expanded nine fold since 2014, when Fairview initially started reporting this data. In 2023, a record 230 first-time woman and minority-owned firms were in the market raising capital, representing 55% of the 417 woman and minority-owned firms in the market. This continued growth in woman and minority-owned firms is driven by the persistent rise of diverse talent in the industry, with many managers possessing a strong conviction to launch their own firms.

Key Findings from Fairview Capital’s 2023 Market Review include:

  • Resilient firm formation: In 2023, a record-high 230 first-time woman and minority-owned firms were in the market raising capital, representing 55% of the 417 woman and minority-owned firms in the market.
  • Lengthened fundraising timelines: This year’s findings also signaled that the fundraising processes are taking longer. In 2023, approximately 50% of the funds in market were continuing fundraises that started in 2022. Nearly 51% of these firms were raising first-time funds and 49% were raising successor funds.
  • Small fund size targets: The median target fund size for woman and minority-owned firms was $100 million, consistent with the prior two years and below the industry-wide median fund size which increased to $228.9 million, resulting in the largest gap ever observed by Fairview.
  • Opportunity in venture capital: In 2023, 72% of woman and minority-owned firms were raising venture capital funds, down slightly from 75% in 2022.
  • Growth equity and buyout strategies growing slowly: In 2023, buyout funds represented 15% of the funds sponsored in market by diverse managers, the highest proportion since 2019.

Demographic-Specific Challenges and Opportunities:

A Growing Proportion of African-American-Owned Firms are Raising Subsequent Funds There were 154 African-American-owned firms in the market in 2023, a 26% increase over the prior year. Approximately 69% of African-American firms in the market were raising a first-time fund, which is down from 75% in 2022. More African-Americans were raising subsequent funds, an early indication of the emergence of more enduring African-American-owned firms.

Expansion of Asian-American-Owned Firms 
In 2023, there were 61 first-time Asian-American-owned firms in the market, a record and a 9% increase from the prior year. 53% of Asian-American-owned firms in the market were raising a subsequent fund, and notably 26% were raising a third institutional fund or higher. Despite the majority of Asian-American-owned firms in market in 2023 raising a subsequent fund, the median target fund size was $100 million, down from $115 million in the prior year.

Latinx Firms Remain Underrepresented But Are Often Raising a Subsequent Fund 
In 2023, 52 Latinx-owned firms were in the market during the year. This is a 21% increase compared to the prior year. Notably, 44% of Latinx firms in the market were raising a subsequent fund, indicating the continued development of firms. Regarding fund sizes, Latinx-owned firms are targeting a median fund size of $100 million, in line with the broader universe of woman and minority-owned firms.

While Woman-Owned Firms Continue to Grow, Minority Woman-Owned Firms Face Greater Challenges

  • The number of woman-owned firms has been a particularly strong area of growth. It was a record year for women-led firms, with 167 in the market, an 11% increase compared to the prior year.
  • The number of African-American woman-owned firms in market decreased 1% over the prior year.
  • The number of Asian-American woman-owned firms in market decreased 5% over the prior year.
  • Latinas are the most underrepresented group as measured by firms in the market. Latina-owned firms were targeting a $35 million fund size, down from $40 million in the prior year.

Fairview Capital is a venture capital and private equity investment management firm founded nearly 30 years ago. With over $10 billion under management since inception, Fairview is one of the largest minority-owned investment management firms in the United States. Headquartered in West Hartford, CT, the firm also has an office in San Francisco, CA.

VCWire

29/02/2024