After setting investment records during the Covid-19 pandemic, it appears the venture capital market is cooling off.
New quarterly data from PitchBook and the National Venture Capital Association shows that investment in high growth startups is down compared to last year’s record-shattering figures, but still well above pre-pandemic levels.
VC firms closed 41 deals worth $207 million in Arizona during the first quarter, according to the latest Venture Monitor report released Thursday, representing the highest volume of Q1 deals the state has had in eight years.
That Q1 momentum follows the $2.02 billion that Pitchbook now estimates that Arizona startups raised last year, which was by far a record for the state.
Across the country, the first quarter generated more than 4,800 VC funding rounds worth more than $70.7 billion. Though this amount is less than the same period last year, $70 billion in a single quarter is still staggering compared to pre-Covid investment; The entire VC industry invested $145 billion for the full year in 2019. Last year, VC funds invested $432 billion into more than 17,000 companies.
Note: PitchBook and the National Venture Capital Association track these figures on an ongoing basis by updating certain transaction details when they find them. As a result, some figures shift between quarterly reports.
“The start of 2022 suggests the onset of an imminent but healthy recalibration period,” the Venture Monitor report read. "Even though Q1 deal value was off pace from every quarter in 2021, Q1 2022 still exceeded pre-2021 quarterly totals. VC deal activity will likely see a delayed reaction to the public market slowdown, a trend to watch closely in Q2. Some investors have started to see initial downward corrections in VC market pricing, valuation, and the speed at which deals are closing.”
Arizona companies including Erthos, Elevation Home Energy Solutions, Wealth Financial Technologies and LifeGuides all raised significant VC funding in the first quarter.
The Pitchbook-NVCA data is a comprehensive, but imperfect data source. For example, the Venture Monitor report counts Managa’s $33 million series A raise in the quarterly total. While Mangata is headquartered in Phoenix, it only has a few employees in the Valley so its VC raise is not likely to have much of an impact locally.
