VC exit activity cools off in Q1 amid volatile economic climate

Venture-backed exit value in the US reached $33.6 billion in the first three months of 2022, marking an 82.5% collapse from the previous quarter, according to the latest PitchBook-NVCA Venture Monitor.

While the total exit value for Q1 is more in line with figures posted in 2018 and 2019, it represents a stark decline after three consecutive quarters of over $192 billion—owing to a slew of headwinds from interest rates, inflation and geopolitical uncertainty.

“The longer the IPO window stays closed, the more number of fresh unicorns and late-stage companies stack up, which can clamor into the public markets later on and put stress on the system,” said Kyle Stanford, a senior analyst at PitchBook.

The near halt in public listings also comes hot on the heels of a marked jump in late-stage valuations. Last year, the median velocity of value creation, which is the annualized valuation growth between rounds—hit $68.3 million for late-stage companies, marking the first time the figure has crossed $15 million, according to PitchBook data.

VC-backed companies that struggle to justify those high valuations or show the revenues needed to IPO are unlikely to raise private capital in the short term. Such companies are going to need to find a different route for their investors to get a return—and that route could be an acquisition, Stanford said.

Corporations should be some of the best-positioned players to capitalize on the lack of IPOs, as a dip in VC valuations could offer some attractive opportunities to strategic acquirers looking to boost inorganic growth, according to the report.

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