Surging inflation having ‘little to no effect’ on VC investing
The rampant inflation currently tearing through world economies has had ‘little to no effect’ on venture capital investing according to a new survey from PitchBook.
Only 8% of 142 VC investor respondents told PitchBook they had significantly pulled back on investing due to inflation rates.
Nearly half of investors reported making between one and five investments in the last twelve months, up from 31% in 2021.
And almost three quarters of investors have allocated over two-thirds of their current fund for new investments – a stark difference from the ‘batten down the hatches’ mentality of many alternatives investors during the Covid-19 downturn.
Almost half of investors surveyed in 2020 said geopolitical events had no impact on investment strategy, while 2% said it strongly impacts strategy.
This year, however, only 21% said these events have no impact on investment strategy, while 11% said it strongly impacts strategy, the report said.
Just over 35% of the survey respondents said they had not made any changes to investment strategy based on inflation, while 36% were still investing with some reduction.
Kyle Stanford, lead VC analyst at PitchBook, said, “It’s encouraging to see that many investors continue to put capital to work despite market uncertainty.
“Our data has also shown a continuation in heightened levels of fundraising this year, adding further capital into the market to boost investment.
“While the data does show a decline in investment activity compared to 2021, global dealmaking is still well above historical pace.”
As of September 30 global VC investment totaled $394.5bn, with $194.9bn in the US and €76bn in Europe.
PitchBook conducted the survey in partnership with tech conference Web Summit.
Paddy Cosgrave, founder and CEO of Web Summit, said, “The findings in this survey are incredibly interesting and prove what we’ve seen on the ground at Web Summit, with more investors and startups than ever before.
“There’s so much dry powder that needs to be deployed, it’s no wonder that inflation is having such little impact on investments. The majority of dry powder available can’t possibly create the type of value that is needed.
“Everybody is chasing something that doesn’t exist anymore, which is a 10-year return.”
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