The third quarter of 2022 was a mixed bag for the US venture landscape. Deal activity across all stages recorded signs of distress, and investors dealt with a lack of liquidity in the public markets. On the bright side, fundraising rose to record highs during the quarter.
Here’s a closer look at five key insights from our latest PitchBook-NVCA Venture Monitor that depict how dealmaking, exits, fundraising and valuations responded to complicated macroeconomic trends.
US VC-backed companies raised $43 billion across an estimated 4,074 deals in Q1, marking the second highest annual total for capital investment after 2021.
While the numbers remain high on a historical basis, PitchBook analysts say venture investors are hesitant to write checks and are increasingly focusing on business fundamentals amid the global economic downturn.
Early-stage deal sizes, which have remained elevated this year, started to show signs of pressure in Q3.
Owing to an increase in investor prudence, the median early-stage deal size fell 19.7% to $8.9 million. The decline could also be attributed to startup founders opting to raise smaller amounts of capital in an effort to preserve equity and only bridge the gap until the market resumes its strength.
The lack of liquidity for late-stage companies has disrupted the momentum for non-traditional investors in the venture market.
Q3 deal activity from nontraditional investors is still higher than for any quarter before 2021. This class of investors includes PE investors, mutual funds, sovereign wealth funds, hedge funds, corporations and family offices.
US VC fundraising has already set a new annual high of $150.9 billion in 2022. The quarter saw investors including Bessemer Venture Partners, Battery Ventures and Lightspeed close funds with more than $1 billion in commitments.
The quarter wrapped up with just $14 billion in total VC exit value. A bright spot for exits was Adobe‘s $20 billion deal to buy design collaboration company Figma, which has not yet closed.
PitchBook analysts say that if the current environment continues, the year’s total exit deal value is expected to fall below $100 billion for the first time since 2016. The lack of exits will limit LP distributions and as a result make VC fundraising more difficult in 2023.
Related read: Q3 2022 PitchBook-NVCA Venture Monitor
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