Inflation, elevated interest rates and economic uncertainty continue to dampen venture capital deals globally, but the U.S. is showing positive signs of dealmaking activity in the second quarter, according to initial data from PitchBook and the National Venture Capital Association.
In data released July 3, PitchBook's lead U.S. venture capital analyst Kyle Sanford and Nalin Patel, the market research firm's lead private capital analyst for the EMEA region, provided a sneak peek into second quarter venture capital activity.
Although there’s been an uptick in global deal value, the overall dealmaking environment is “struggling along,” as a high number of VC-backed companies are under pressure from a reduction in available capital. Many VC firms are being forced back into the market to raise additional private funds instead of exiting, Sanford and Patel wrote in an email.
“For VC returns to see an increase, large tech companies must begin to list publicly at a higher pace than seen through the first half of the year,” Patel and Sanford wrote. “Exit value is pacing better than both 2022 and 2023, yet outside of those years, the market is facing its lowest exit total since 2016.”
Some 241 U.S. companies reported exits, generating $23.6 billion in exit value during the second quarter. It marks a sequential decline as 261 companies exited in the first quarter, generating $25.4 billion in value, according to PitchBook data.
U.S. venture capital fundraising reflects the impact of an ongoing market slowdown since pandemic highs, with just $37.4 billion in commitments through the first half of 2024. Of that total, California-based venture capital firm Andreessen Horowitz raised more than $7 billion, followed by $3 billion funds by Norwest Venture Partners and TCV, respectively.
National venture capital deal activity, however, rose to $55.6 billion across 3,108 deals in the second quarter, marking the greatest quarterly total since the second quarter of 2022, when funding reached $77.6 million.
“U.S. deal activity has increased on a count basis for each of the past three quarters,” Patel and Sanford wrote. “It’s a positive sign that deals are getting done, but lengthening exit slowdown is pressuring companies back into a market that is less forgiving than that which companies are used to.”
Next week, Pitchbook will release its full Q2 Venture Monitor report, which includes a breakdown of venture capital deals by metro area and provides in-depth commentary on deal activity.
That report will likely include notable deals by Valley startups, included a $96 million series D round raised by Tempe-based biotech company Nectero Medical, among others.
Arizona startups inked 30 deals totaling $273.9 million in the first quarter, the Business Journal previously reported.
