VC deal activity declined in 2022, portending tough times • Alaska Green Light Blog
#deal #activity #declined #portending #tough #times #Alaska Green Light Blog Welcome to Alaska Green Light Blog, here is the new story we have for you today:
Capital is becoming increasingly difficult to come by
Market headwinds continue to drive start-ups to seek venture backing. That’s the key finding of a new PitchBook report that looked at VC trends towards the end of 2022, particularly Q4, including investments made at the seed, late-stage, and near-exit levels.
First the good news: “Annual year-over-year, angel and seed-stage deal activity remained relatively resilient in 2022, with $21.0 billion invested in an estimated 7,261 deals,” the report reads. Last year set an annual record for capital raised, with $162.6 billion closing across 769 funds – the second straight year to surpass $150 billion.
But the year ended up being mixed. The fourth quarter of 2022 was the fourth straight quarter of declining deals, while exit activity for the full year fell to $71.4 billion — the first time since 2016 that the number fell below $100 billion. Acquisition volume also took a nosedive, with the fourth quarter totaling just $763 million in acquisition value — the lowest quarterly figure in more than a decade.
“Public exits from VC-backed companies have slowed to near-nonexistent levels, with just 14 IPOs in the fourth quarter, showing how drastically institutional investors’ appetites have been affected by rising interest rates and volatile macroeconomic factors,” the report said PitchBook report authors wrote.
Why the instability? PitchBook blames a variety of factors, including non-traditional investors slowing down their capital commitment to VC due to less attractive risk-reward profiles. According to the report, the upside potential for VC-backed startups has fallen precipitously in 2022 compared to 2021, which has turned many investors away from the space.