Fund of funds (FoF) fundraising has been declining as traditional venture firm fundraising reaches record highs. While U.S.-based VC FoFs raised $400 million in Q1 2023 and $3 billion in 2022, these numbers pale in comparison to the $24.4 billion raised in 2021 and the peak of $33.7 billion in 2017. The decline in interest can be attributed to the double layer of fees that LPs have to pay, as well as the extra time it takes for the funds to be deployed. Additionally, with the increase in new firms and funds, LPs now have more opportunities to directly invest in VCs without the need for FoFs. Nonetheless, FoFs still have a place in the future of venture capital, albeit in a different capacity.
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