Venture capital deals have continued slowing down amid increasing economic headwinds across the nation during the third quarter, and it is no different in Arizona.
The latest quarterly Venture Monitor report from research firm Pitchbook and the National Venture Capital Association (NVCA) found that the deal count was 37 during Q3 in Arizona, with a total of $236.57 million poured into companies in the state.
That’s the lowest quarterly number of Arizona deals this year, and it’s even a lower number than 2019’s pre-pandemic Q3 count of 49. What's more, the money invested was a far cry from last year’s $652.9 million third quarter as the Grand Canyon State continued to build momentum during a supercharged 2021 that saw $2.02 billion invested in Arizona companies.
The latest dollar figure was also a far cry from the previous quarter, when Arizona companies got $641.7 million in VC investments in 44 deals. Those Q2 numbers were an update from Venture Monitor's earlier reported figures for last quarter of 39 deals and $463.08 million.
The top 10 Arizona deals for the past quarter were all investments in Phoenix-area companies — seven of them offering some form of tech services, five of them software companies. Leading the way was a $75 million series B infusion into Tempe cybersecurity software company Bishop Fox.
Other top Arizona deals for Q3 included the following:
- $23 million in series B funds for Phoenix-based health care technology company Dot Compliance
- $22 million in series B funds for Scottsdale-based business software company MyCarrier
- $22 million in series B funds for Tempe-based workflow software company Imagry
- $13 million in series A funds for Chandler-based network management software company SynSaber
The national picture
Nationally, Pitchbook and NVCA said deal counts were down across all stages for a second-straight quarter after reaching a record high Q1. Total money invested was the lowest in nine quarters — something that was not true of Arizona, which actually has had seven quarters lower than this one since 2019.
In all, $43 billion was invested nationwide in a little more than 4,000 deals during Q3. Total dollars invested in late-stage venture capital deals were down 48.3% from the second quarter and were the lowest in the past 11 quarters. Pitchbook said that reflected the fact that nontraditional investors, who are the largest drivers of mega deals and the overall growth seen at the top of the market, have been backing away faster than the broader venture market.
While investments were down, VC fundraising has already set a new record this year and was at $150.9 billion by the end of quarter, which surpassed the previous high from last year. The report said there is more than $290 billion in dry powder, or money available to be invested, which is the largest amount that has ever been stored in VC funds.
Exits have dipped significantly, Pitchbook said, with $14 billion in value through about 300 exits during Q3. The report said that 2022 is on pace to fall below $100 billion for the first time since 2016.
Though things are slowing down, Pitchbook pointed out that looking at 2021 as exceptional helps to put it in perspective.
"The VC slowdown narrative that has been pervasive in the market this year has finally materialized in the data, with nearly every metric aside from fundraising falling sharply in Q3," said John Gabbert, founder and CEO of Pitchbook, in a statement. "The VC ecosystem, however, has shown remarkable resiliency in the face of continued economic headwinds, raising record levels of capital and closing an unexpectedly high number of deals. In many ways, 2021 was an outlier year, and the VC market is now returning to pre-pandemic levels and long-term trends of steady growth.”
