US venture capital investment dollars drop in 2022

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

The numbers are in: U.S. venture capital deployment plummeted in Q1, according to the latest PitchBook data.

Why is this important: This is largely a ripple effect from the pullback in the public market that began late last year. Companies are rethinking near-term IPO plans, and investors are recalibrating deal sizes, especially when it comes to late-stage funding.

By the numbers: Venture capital investment in the United States reached $70.7 billion in the first quarter of 2022, compared to $95.4 billion in the previous quarter and $77 billion year-on-year.

  • VCs invested in 3,723 deals, per PitchBook.
  • There are also around 1,099 additional unreported transactions, although they shouldn’t have a significant impact on the overall value.
  • Mega deals (those above $100 million) slowed to $36.6 billion from $58.1 billion in the prior quarter and $44.2 billion year-on-year.
  • Globally, venture capital funding also fell in the first quarter, falling 19% quarter-on-quarter to $143.9 billion, according to data from CB Insights.

What they say“The top 10% of deals generate a huge proportion of deal dollars each quarter…some of those deals that don’t happen will impact overall dollars,” analyst Kyle Stanford told Axios. venture capital from PitchBook.

Yes, butQ1 numbers are still above pre-2021 levels, and VCs currently have an all-time high of dry powder – capital they will need to deploy.

  • Median valuations at all stages have held steady or increased, according to the PitchBook. (Recalling a few weeks ago, a limited liability partner told Axios that he had yet to see 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 these industries attract growing interest.
  • And: “Even if mega-deals slow, this will be the second-highest year for mega-deals,” Stanford predicts.

What we are looking at: Whether public listings resume and how quickly VCs deploy their newly raised funds (pandemic years have contracted these cycles thanks to a startup boom).

  • Non-traditional investors like crossover funds are also a bit of a wild card, as some are pulling back on investments in pre-IPO companies – although Q1 numbers don’t show that yet.
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