Austin quarterly VC deals dip amid nationwide slowdown

Venture capital deployment in the Austin metro declined in the second quarter of 2022, mirroring national trends.

Why it matters: Startups rely on outside capital to grow, and the pandemic marked a boom for fundraising at all stages. But with the broader market heading toward bear territory, the money could be less abundant.

By the numbers: The metro area's second quarter of 2022 delivered 80 deals valued at more than $870 million, new data from PitchBook shows.

• The figure is a dip from the previous year, when the area saw 94 deals valued at more than $1.9 billion.

Yes, but: The area has gained plenty of momentum in recent years to fuel future investments. Plus, Austin-based venture capital firms have recently announced big funds for startups.

• Silverton Partners announced this month that it raised $248 million across two funds — one for early-stage investments and another for existing portfolio companies.
• S3 Ventures launched a $250 million fund in March.
• LiveOak Ventures secured $210 million for its third fund in November.

What they're saying: Brian Smith, founder and managing director of S3 Ventures, said the firm has seen its most active year ever with seven new investments so far.

• "I think we expect it to cool off a little bit going into the second half of the year, but it's been a strong year for us already," he told Axios.
• Smith added that the number of deals S3 is reviewing has already slowed: "I think either companies are not forming or they're spreading their cash out longer."

Of note: Startups in their early stages have been largely insulated from late-stage and public market corrections, and venture capital funds that continue to see strong limited partner (LP) interest have remained relatively unaffected, the PitchBook report found.

• S3 Ventures operates under the single LP model, which allows the firm to scale as needed, Smith said.

The bottom line: Expect the pace of fundraising to continue to slow, according to Pamela Aldsworth, head of venture capital coverage for JPMorgan Chase Commercial Banking.

• "If the next few months are as quiet as we anticipate, founders will need to make some tough choices to preserve runway," Aldsworth said.