As venture investors returned from their two-week holiday hiatus, researchers wrapped up their assessments of what happened in startup investing last year.
While many details won't be known until after this week when full reports from the PitchBook Data, the National Venture Capital Association and others start rolling in — it seems pretty clear that full year data won't present an accurate picture of the state of Startupland.
In 2022 the IPO window largely was closed after Q1 and laid off startup workers sold their private stock at steep discounts, while megafunding rounds slowed to a trickle and the unicorn birth rate dropped dramatically as the year wore on, the Business Journal recently reported.
Here are some assessments from an "early look" by PitchBook from the data flood that is starting to emerge from 2022:
- Seed and angel deals were a highlight, despite a steep quarter-to-quarter drop: Investing in the earliest startup rounds held up the best last year in the U.S., with about $21 billion invested in 7,261 fundings. While that is a drop in the annual number of deals of about 5%, the deal count crashed in Q4 of 2022 about 46% below the same period in 2021. "Should the economic downturn continue, we expect this stage to start to feel pressure due to declining deal activity and investor demand in the early and late stages," PitchBook said in its report.
- "Tourists" departing: Non-venture investors like corporations and mutual funds are sometimes called "tourists" by traditional investors because they tend to head for safety when the going gets rough. That pattern appears to be repeating, according to PitchBook, with just $24.1 billion in deal value that involved nontraditional investors in Q4 — the lowest quarterly value in three years. "Not only are we seeing lower deal value, but we are also seeing fewer nontraditional participants within the venture ecosystem," PitchBook said in its report.
- No exit: The total value of venture-backed companies that went public or were acquired dropped to $71.4 billion — the first time that figure has been below $100 billion since 2016. The deal value of M&A deals totaled just $763 million in Q4, the first time that has been below $1 billion in more than a decade.
- Lots more "dry powder": Venture investors raised $162.6 billion across 769 funds, topping the annual record set in 2021 and only the second time the total has ever exceeded $150 billion. "The year saw an increasing amount of capital concentrate in larger-sized funds led by experienced managers within the Bay Area and New York VC ecosystems," according to PitchBook.
There will be lots more insights coming next week and later this month as researchers sift through the chaos of 2021. Stay tuned!
