NVCA: Venture capital investment in the United States slowed further in the second quarter as economic fears grew

The value of venture capital deals in the United States fell significantly in the second quarter of 2022, as economic fears grew and Russia attacked Ukraine.

The first glimpse of the PitchBook-NVCA Venture Monitor (preliminary data) showed a slowdown in the second quarter in the US market, which is the largest in the world. The outsized trades that have become a hallmark of 2021 are a distant memory as investors take a more cautious approach to the market's biggest trades.

While the venture capital industry may not be suffering as much as public market investors, crypto speculators, or ordinary people affected by inflation and the pandemic, it is concerning that the industry of venture capital is slowing down because startups have been such an engine of job growth in the United States

Q2 2022 was the first quarter since Q4 2020 to show less than $77 billion in closed deal value, with just over $62 billion closed. To put the slowdown into perspective, the deal value in Q2 2022 was the highest of any quarter prior to Q4 2020.

The number of transactions decreased by 10% between the first and second quarters. But the value of deals fell from $94.4 billion in Q4 2021 and $82 billion in Q1 2022 to $52.3 billion in Q2. Median valuations have remained fairly stable, but the upper tiers with inflated valuations have disappeared, said Kyle Stanford, principal analyst at Pitchbook, in an interview with VentureBeat.

First look at NVCA Q2 2022 data.

“Right now we're seeing some pretty high prices in the market. The number of transactions has been down, but it's really not that bad, and it's still one of the highest quarters ever,” Stanford said. “The value of the transaction however fell quite significantly compared to last year. This was quite expected as this is the first quarter since Q4 2020 that had less than $77 billion invested.” < /p>

Investments in cryptocurrencies have suffered particularly. Global cryptocurrency and VC blockchain transaction activity fell from 656 transactions worth $9.9 billion in the first quarter to 514 transactions worth $6.7 billion. dollars in the second quarter, according to the report.

“Crypto, obviously, has been one of the most attractive investments for VCs over the past couple of quarters, but growth has been at an unsustainable rate and so a slowdown is not a big deal. unexpected in this area," Stanford said.

But venture capitalists still have plenty of funds to invest. The number of transactions has remained relatively high at all stages, with seed reaching recent highs at around 1,400 transactions. The momentum of the past six months continues to bring new deal announcements, which is a positive sign for the market, especially relative to industry narratives.

With well over $230 billion in dry powder and nearly 3,000 funds closed since the start of 2019, the NVCA said we can expect investment to continue until that more certainty be found in the economic markets.

"There's a lot of dry powder and a lot of capital available on the market," Stanford said. "But we're seeing just a bit more caution, and rightly so, than in 2021."

The slowdown will likely continue for several quarters as we see stock market uncertainty, interest rate hikes and rising inflation, Stanford said.