Core Insights - The article highlights the significant pressure on fund returns due to project valuation declines, with many funds experiencing substantial losses this year [2][3] - The term "Downround" has become prevalent in the primary market, indicating a widespread reduction in valuations for newly financed projects [3][4] Group 1: Market Conditions - Approximately 70% of projects that received new financing in the past year have experienced Downround valuations, attributed to previously inflated valuations and strong negotiation positions from state-owned or strategic investors [3] - The current market sentiment among investors is characterized by increased uncertainty, leading to a general reluctance to accept high valuations [3] Group 2: Fund Performance - Many funds, even those managed by top-tier GPs, are reporting disappointing performance, with some yielding returns lower than traditional savings accounts [4] - The difficulty in exiting investments has led to a more cautious investment approach, contributing to the Downround phenomenon, creating a vicious cycle of poor exit conditions and declining valuations [4] Group 3: Investment Strategies - Investment institutions are increasingly opting for profit-sharing agreements instead of traditional buyback guarantees, reflecting the pressure on DPI (Distributions to Paid-In) [5][6] - The shift towards seeking projects that can provide dividends is a response to the current market conditions, as traditional exit strategies like IPOs and valuation growth are less viable [6] Group 4: Exit Strategies - Many early-stage investment firms have adapted their exit strategies to ensure returns to state-owned LPs, focusing on recovering initial investments during new financing rounds [6][7] - The successful implementation of these strategies has allowed some firms to maintain a DPI above 1, despite a challenging market where many projects have failed [7]