As investors become more selective, fintech, cyber, supply chain and alternative energy opportunities remain in vogue and top recipients of global venture capital funding, reaching $120.2 billion in the past from T2’22.
Investors are more focused on profitability while the Americas and Europe show the most resilience, attracting $66.2 billion and $27.3 billion in venture capital funding respectively in Q2’22.
Global Fundraising Hit $158.6 Billion Mid-Year: Record Pace Despite Market Uncertainty
NEW YORK–(BUSINESS WIRE)–Amid geopolitical, supply chain and economic uncertainty, overall global venture capital investment is down, but several sectors, including fintech and cleantech, benefit from more selective investments.
According to the Q2’22 edition of Venture Pulse – a quarterly report, published by KPMG Private Enterprise, which analyzes key venture capital deals and trends globally – fintech, cybersecurity, supply chain management and alternative energy opportunities and energy storage solutions continue to attract considerable investor interest. This is despite global venture capital investment falling to $120.2 billion from 8,420 deals in Q2’22.
The Americas attracted $66.2 billion in venture capital investment – more than half of total global venture capital investment – in the second quarter of 2022, with the United States accounting for $62.3 billion. dollars of that amount. The European market showed strong resilience during the quarter, attracting $27.2 billion in investment during Q2’22. Despite the second consecutive quarter of declines, venture capital investments in Europe remained high compared to before Q2’21. 2’22 was the weakest in Asia, falling to an eight-quarter low of $24.5 billion on 2,206 deals.
Investor interest in supply chain and logistics continues to grow as industry challenges continue to impact. Soaring global energy prices and growing concerns about energy security have prompted investors to seek alternative energy and storage options. Investments in electric vehicles, battery technologies and increasingly hydrogen are becoming more attractive.
The United States attracted the world’s largest venture capital deals in Q222, including a $2 billion raise by Epic Games, a $1.7 billion raise by Space X and a $1.5 billion increase by Gopuff. With its $1.2 billion raise, Germany-based fintech company Trade Republic took fourth place — the only company outside the United States to raise more than $1 billion in the quarter. In Asia, the largest deal of the quarter was an $805 million raise from India’s Dailyhunt.
“With falling valuations, many tech companies performing well in public markets and no end in sight to the level of geopolitical uncertainty, despite other challenges facing the venture capital market globally, we are beginning to see investors asking their portfolio companies to preserve cash,” said Jonathan Lavender, Global Head, KPMG Private Enterprise, KPMG International.
“As we approach Q3’22, this trend should continue as start-ups seek to survive in an increasingly difficult environment where profitability will be of crucial importance.”
Main Highlights – Q2’22
- Global venture capital investment fell significantly from $165.3 billion in 11,468 deals in Q1’22 to $120.2 billion in 8,420 deals in Q2’22.
- Venture capital investments in the Americas grew from $89.3 billion in 5,034 deals in Q1’22 to $66.2 billion in 3,778 deals in Q2’22. The United States accounted for $62.3 billion of investment in Q2’22 in the Americas, compared to $81.9 billion in Q1’22.
- Venture capital investments in Asia fell to an eight-quarter low of $24.5 billion on 2,206 deals in Q2’22.
- Despite falling to $27.2 billion in Q2’22, venture capital investment in Europe remained quite strong compared to historical trends.
- Global fundraising remained very strong, with $158.6 billion raised at the end of the second quarter of 2022 – well on track to surpass the record of $252.2 billion set during the year calendar 2021.
- After dropping from $355 billion in Q4’21 to $70 billion in Q1’22, the exit value fell further to just $50.8 billion in Q2’22.
- CVC-affiliated global investments grew from $76.6 billion in Q1’22 to $49.7 billion in Q2’22.
Global fundraising remains at a record pace, driven by activity in the United States
Global fundraising activity remained at a record pace mid-year, with $158.2 billion in fundraising at the end of Q2’22. The United States helped support global fundraising amounts, accounting for $121.5 billion at mid-year, up from the region’s annual record of $138.9 billion in 2021. in Q2’22 and is well placed to stay warm before Q3’22.
Fundraising activity in Europe fell at a record pace, with $13.3 billion in fundraising at mid-year, while fundraising in Asia remained very subdued from highs previous years, with $16.9 billion raised in the first half of 2022.
No end in sight to uncertainty, but interest in new technologies will grow
As Q3’22 approaches, the global uncertainty plaguing the world is expected to continue, which will likely continue to keep the IPO window closed and venture capital investments low. Downside rounds could become more common as companies are forced to raise funding rounds despite the challenging fundraising environment.
M&A activity globally could increase as investors seek deals between struggling companies and start-ups in various sectors seek to consolidate to improve their economies of scale and positions on the market. In technology, the crypto tide is likely to turn with further consolidation among companies heading into Q3 22 as many try to weather a massive asset sell-off.
“While there is still some dry powder, over the next quarter venture capitalists are going to become much more critical of targets and are likely to put more and more emphasis on the profitability,” said Conor Moorehead of KPMG Private Enterprise in the Americas region and partner of KPMG in the United States.
“We have been talking for some time about potential consolidations, especially in more mature sectors like e-commerce. While the top one, two or three companies in a particular space might continue to be attractive to investors, the others will likely experience a setback. This will likely lead to consolidation as companies run out of cash.
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