VC funding to Massachusetts companies fell 30% in the first half of 2022 compared to the same time period last year.
Venture capitalists in Massachusetts have been predicting a decline in venture capital funding as talk about an economic downturn persists. Some say Bay State companies need to say good-bye to wildly high valuations and learn to thrive without easy exits and relatively open access to capital. The data from the first half of 2022 supports their concerns.
Bay State companies secured 505 deals worth $12.5 billion in the first six months of the year, according to the latest PitchBook-NVCA Venture Monitor report. That’s down from the $17.8 billion among 595 deals during the first two quarters of 2021. Companies raised even larger rounds in the second half of 2021, bringing in $18.1 billion from 561 deals.
Massachusetts remains behind California and New York for total VC funding. New York’s VC funding declined only slightly in the first half of 2022 compared to the same time in 2021, dipping down to $18.9 billion from $21.8 billion. California also saw a decline from $77.2 billion to $68 billion.
While funding may not be flowing in record numbers, venture capitalists are still raising funds. VCs in Massachusetts raised $6.87 billion in the first half of this year. That’s a little more than half of the $12.6 billion they raised in all of 2021.
“The second quarter of 2022 brought an expected continuation of market tightening in some parts of the U.S. venture ecosystem,” NVCA President and CEO Bobby Franklin said in a statement. “However, the industry’s record dry powder continues to fuel critical innovation that is addressing the country’s important needs. The venture industry’s long-term view of investing, even during uncertain fiscal times, is further proof it is a reliable economic engine with an eye toward funding the next generation of great American companies.”
Exit values fell off a cliff in recent months. In the last quarter, exit values in Massachusetts dropped by 87%, going from around $6.8 billion in the first quarter of 2022 to $864M in the second.
Nationally, PitchBook said IPOs for VC-backed companies are largely nonexistent, with only 22 closed during the first half of the year, compared to 183 in 2021, and 108 in 2020.
“Exits remain extremely low while late-stage companies act with caution as a result of bearish public market activity. There are still uncertainties as to what to expect in the second half of the year, however, market indicators show resilience to weathering the potential economic downtown,” said John Gabbert, founder and CEO of PitchBook.
