NVCA: U.S. venture capital deals activity weakened in Q3

The value of U.S. venture capital deals weakened across all stages in the third quarter of 2022 as the economy and startup ecosystem showed more signs of distress.

The Pitchbook-NVCA Venture Monitor First Look (preliminary data) showed a slowdown in the third quarter in the U.S. market, which is the biggest in the world. It was the third consecutive quarter of decline in completed deals.

VCs invested in 4,074 companies in Q3, down almost 20% from the quarterly record high recorded in Q1 (5,049). It is the the lowest volume count seen in any quarter since Q4 2020 (3,364). Q3 saw $43.0 billion
invested in VC deals across all stages, a nine-quarter low, cementing a tone of investor hesitancy and increased focus on business fundamentals amid the global economic downturn, even if the numbers remain high on a historical basis.

But VCs have dry powder. U.S. VC fundraising has set a new annual high through only three quarters of 2022, with $150.9 billion raised so far. The 21-month fundraising total is $298.1 billion. Given public market turbulence and frozen avenues for liquidity, the NVCA expected limited partners to be concerned about their overexposure to this asset class and the potential for timely returns negatively impacting fundraising activity.

Entering the second half of the year, the NVCA is finally beginning to see that momentum degrade, as just $29.4 billion in fundraising was added to the dataset since the Q2 report, the lowest quarterly total
this year. So far this year, Layoffs.fyi has tracked 661 startups laying off more than 83,000 people this year.

In cryptocurrency, deals have dropped. In the third quarter, VCs invested in cryptocurrency startups in 456 deals with a total value of $4.44 billion invested. That compares to 505 deals that raised $8.83 billion in Q3 2021 and 674 deals that raised $7.63 billion in Q2 2022. The peak was Q1 2022, when 826 deals raised $10.87 billion.

Low exits

With just $14.0 billion in exit value generated across an estimated 302 exits in Q3, the VC exit market had few bright spots. These figures are in line with exit activity expectations around 2014 and well off the highs seen in 2021 — $266.8 billion in exit value was generated in Q2 that year.

One highlight of the quarter was Adobe’s announced $20 billion acquisition of Figma, a developer of a web-based design platform. The deal has not yet closed. Few options remain for the growing group of unicorns, as 2022 has produced only 60 public listings, just one year after a record 303 VC-backed public listings generated $670.0 billion in exit value.

With the expectation that the current slow environment will remain, this year’s total exit value is in danger of falling below $100 billion for the first time since 2016.

The PitchBook-NVCA Venture Monitor First Look is a preliminary release of top-line venture industry figures for the U.S. market, intended as a first-to-market source of key datasets and findings. It will serve as a preview of the full PitchBook-NVCA Venture Monitor, which will be released in full shortly after these initial figures are made public.