It is becoming increasingly difficult to obtain capital
Market headwinds continue to chase startups chasing corporate backing. That’s the key finding of a new PitchBook report that looked at VC trends toward the end of 2022, specifically Q4, including investments made at the early stage, late-stage and near-the-market. exit level.
First, the good news: “Year-over-year, deal activity in the angel and seed stage remained relatively resilient in 2022, with $21.0 billion invested in an estimated 7,261 deals,” the report said. In fact, last year set an annual record for capital raised, with $162.6 billion in 769 funds – the second consecutive year with more than $150 billion.
But the year was ultimately mixed. The fourth quarter of 2022 marked the fourth consecutive quarter in which the number of deals declined, while full-year exit activity fell to $71.4 billion – the first time the figure fell below $100 billion since 2016. Acquisition volume also increased a nosedive, totaling just $763 million in fourth-quarter value acquisition deal — the lowest quarterly value in more than a decade.
“Public exits of venture-backed companies have slowed to near-nonexistent levels, with just 14 public listings in the fourth quarter, demonstrating how drastically institutional investor appetites have been impacted by rising interest rates and volatile macroeconomic factors,” the authors write. of the PitchBook report. wrote.
Why the instability? PitchBook blames several factors, including non-traditional investors slowing their capital commitment to VC amid less attractive risk/reward profiles. According to the report, relative to 2021, the upside potential for VC-backed startups in 2022 suddenly dropped, leading many investors to stray from the space.