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Venture Monitor

Late-stage VC investment lags despite record deal count

Stock market declines are dampening enthusiasm for supersized startup deals, but elsewhere in the late-stage market, investors are finding plenty to get excited about.

Stock market declines are dampening enthusiasm for supersized startup deals, but elsewhere in the late-stage market, investors are finding plenty to get excited about.

US VC-backed companies at the late stage collected $44.1 billion in Q1, representing a 27% decline from the previous quarter, according to the latest PitchBook-NVCA Venture Monitor. That’s despite one of the highest quarters ever for completed late-stage deals, according to a PitchBook estimate.

“Q1 produced a dichotomy of trends at the late stage,” said Kyle Stanford, a senior analyst at PitchBook.

The reason is simple. The largest late-stage deals, an indicator of the exuberance in venture capital in recent years, weren’t done at the same pace we saw in 2021, leading to an overall decline of deal value within the late stage.

 


That pullback wasn’t unexpected, Stanford added. With the IPO window essentially shut and public markets increasingly emphasizing profitability, late-stage companies may be feeling the squeeze to raise additional capital in the private markets or look to other exit avenues.

“The largest deals, in theory being closest to the public market turmoil, are going to be the first to see any shift,” said Stanford.

Crossover investors, a significant part of the late-stage storyline, also took time to assess their current public and private portfolios. That assessment likely took some of their attention away from making new large bets for the time being, Stanford added.

Although total venture capital investment has dropped considerably from its high in Q4 last year, US companies pulled in more than $70 billion for the fifth consecutive quarter, according to PitchBook data.

At the early stage, deal count also grew while deal value declined in Q1, but remained above or in line with levels seen in 2020. Combined seed and angel deal activity grew slightly in the most recent quarter.


Featured image by Malte Mueller/Getty Images

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