Apr 20, 2022 - Economy

U.S. venture dollars recede after pandemic boom

Data: Pitchbook; Chart: Thomas Oide/Axios
Data: Pitchbook; Chart: Thomas Oide/Axios

The numbers are in: Venture capital deployment in the U.S. slumped in Q1, per the latest PitchBook data.

Why it matters: This is largely a knock-on effect of the public market pullback that kicked off late last year. Companies are rethinking near-term public listing plans, and investors are recalibrating deal sizes — particularly when it comes to late-stage funding.

By the numbers: U.S. venture investments hit $70.7 billion in 2022's first quarter, down from $95.4 billion in the previous quarter, and from $77 billion year-over-year.

  • VCs invested across 3,723 deals, per PitchBook.
  • There’s also an additional estimated 1,099 unreported deals, though they're not expected to impact the overall value significantly.
  • Mega-deals (those above $100 million) slowed to $36.6 billion, from $58.1 billion the prior quarter and $44.2 billion YoY.
  • Globally, VC funding also decreased in Q1, dropping 19% quarter-over-quarter to $143.9 billion, per data from CB Insights.

What they’re saying: "The top 10% of deals drive such an enormous proportion of deal dollars every quarter ... some of those deals not happening is going to impact the overall dollars," PitchBook venture analyst Kyle Stanford tells Axios.

Yes, but: Q1 numbers are still higher than pre-2021 levels, and VCs currently have a record level of dry powder — capital they’ll have to deploy.

  • Median valuations at all stages have remained stable or grown, per PitchBook. (Recall from a couple of weeks ago, a venture-limited partner told Axios he hadn't yet seen the valuation discipline that fund managers in his portfolio had promised.)
  • Biotech and fintech startups have also seen deal sizes and valuations continue to grow, as those industries draw booming interest.
  • And: "Even if mega deals slow down, it's gonna be the second-highest year for mega deals," predicts Stanford.

What we’re watching: Whether public listings pick back up, and at what pace VCs deploy their newly raised funds (the pandemic years contracted those cycles thanks to a startup boom).

  • Nontraditional investors like crossover funds are also a bit of a wildcard as some pull back their investments in pre-IPO companies — though Q1's numbers aren't showing that quite yet.
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