NVCA: US venture capital at two-year low

U.S. venture capital investment fell to its lowest level in nine quarters in the third quarter ended September 30, according to the Q3 2022 PitchBook-NVCA Venture Monitor.

The market stall came as the venture capital ecosystem increasingly shows signs of distress in response to the current economic headwinds. But it also happens at a time when VCs are sitting on a lot of dry powder. The report is produced jointly by PitchBook and the National Venture Capital Association (NVCA) with support from Insperity and J.P. Morgan.

The number of transactions fell at all stages for the second consecutive quarter after hitting a record high in the first quarter of 2022 and the total funds invested fell to their lowest level in nine quarters, adding to investor hesitation and increased focus on business fundamentals.

This pullback has been particularly pronounced in late-stage, where non-traditional investors — the main drivers of mega-deals and overall growth seen at the top of the market — have slowed investment in capital-backed startups- risk. Along with several outsized deals in the third quarter, annual exit activity has also been sluggish, with the 2022 exit value on track to fall below $100 billion for the first time since 2016.

NVCA: Deal closing is on the decline.

Contrary to deal and exit activity and value, venture capital fundraising has already reached a new annual high in the past first three quarters of the year. With over $290 billion in dry powder, by far the largest amount ever stored in venture capital funds, GPs have more than enough capital to support innovative startups through their life cycle. life in the years to come, despite the tumultuous economic environment.

“The narrative of the venture capital downturn that has been ubiquitous in the market this year has finally materialized in the data, with nearly every metric except fundraising down sharply in third quarter," John Gabbert, CEO of PitchBook, said in a statement. “The venture capital ecosystem, however, has shown remarkable resilience in the face of persistent economic headwinds, raising record levels of capital and closing a surprisingly high number of deals. In many ways, 2021 has been a outlier year, and the venture capital market is now returning to pre-pandemic levels and long-term trends of steady growth.”

Investing activity

NVCA and Pitchbook reported lower VC investments in Q3.

VC investments totaled only $43 billion across approximately 4,074 deals in Q3 2022 , the lowest in nine quarters for the value of transactions. The estimated number of transactions fell nearly 20% from the quarterly high in the first quarter of 2022 – the lowest number since the fourth quarter of 2020.