According to research released on Thursday, venture capital dealmaking in the United States decreased in the first half of 2022 as investors were reluctant to write huge checks for startups owing to shaky macroeconomic conditions and market unrest.
Deals were completed for a total of $158.2 billion in the first half of 2021, down to $144.2 billion in the first half of 2022 as a result of the continued stock market crash brought on by concerns about an impending recession, raging inflation, and aggressive rate hikes.
As businesses increased their bets on high-tech, biotech, healthcare, and fintech startups, boosted by abundant liquidity and an accommodating monetary policy, VC dealmaking reached an all-time high of over $340 billion in 2021.
According to a report by PitchBook and the National Venture Capital Association, funding for early-stage companies in the second quarter also came in significantly below the record levels set in the previous year, even though investments in late-stage firms saw a significant decline in average size and valuations from recent highs (NVCA)
In the second half of 2022, the rate of VC activity is also anticipated to drop as the bar for finalizing deals rises and pricing uncertainty spreads into the early phases of the investment cycle.
Due to the suspension of initial public offerings (IPOs) in the face of declining valuations and choppy trading on U.S. markets, the door to prospective billion-dollar exits has also been closed.
John Gabbert, the founder and CEO of PitchBook, stated that “exits remain extraordinarily low while late-stage companies behave with caution as a result of pessimistic public market activity.”
With only eight companies managing to list, the IPO market in the second quarter fell to its lowest point in 13 years. According to the research, only 22 VC-backed companies were able to successfully list in the first half of the year, as opposed to 183 during the same period in 2021 and 108 in 2020.
