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US venture capital trends in five charts

In the second quarter of 2022, VC investors took a more cautious dealmaking approach to navigate the impact of the public market slowdown on their industry.

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In the second quarter of 2022, VC investors took a more cautious dealmaking approach to navigate the impact of the public market slowdown on their industry.

Here’s a closer look at five key trends from our Q2 2022 PitchBook-NVCA Venture Monitor that depict the state of the venture market amid inflation concerns and the tightening monetary environment.

 


US VC-backed companies raised $62.3 billion across an estimated 4,456 deals in Q2. While this activity was aided by momentum from 2021, it was a strong showing by historical standards, and a positive sign for the market when compared against current industry narratives.

PitchBook analysts say that we can expect strong fundraising activity and a record amount of dry powder to drive dealmaking in the near future until more certainty can be found across markets.

 


In recent years, a high number of micro-funds—venture investment vehicles that raise $50 million or less—have helped to push the median pre-money valuation of seed-stage deals to a record $12 million in 2022. The median deal size also notched the second-highest quarterly figure at $2.7 million.

 


Strong fundraising activity in the VC industry is boosting a startup-friendly environment, giving founders more options when searching for capital.

The PitchBook VC Dealmaking Indicator quantifies how startup-friendly, or investor-friendly, the capital raising environment is. It shows that conditions remain historically founder-friendly, despite a recent reversal in the trend. One such founder-friendly feature is a decline in the share of deals that include liquidation participation terms.

 


The second quarter of 2022 showed signs of a slowdown for US venture dealmaking with participation from nontraditional investors. PitchBook analysts say that mega-rounds of $100 million or more, of which nontraditional investors have been a major driver, are being completed at a much slower pace as growth investors take a more cautious approach.

 


US VC firms raised $121.5 billion in the first six months of 2022. Funds of more than $1 billion account for nearly 64% of that figure.

However, the relative ease with which mega-funds have been raised may obscure a more difficult fundraising environment for smaller players, as LPs signal they are overwhelmed with commitments to VC.

Featured image by Klaus Vedfelt/Getty Images

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    Written by Priyamvada Mathur
    Priyamvada Mathur writes about venture capital at PitchBook.

    She is an Indian chartered accountant and has studied economics and journalism.
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