The market for exits has plummeted over the past several months, and 2023 is shaping up to record the lowest exit value for U.S. companies and venture capital investors in about 15 years, according to new PitchBook data.
Exits such as mergers, acquisitions and initial public offerings have reached $12 billion in value nationally across 471 deals in the first half of the year, according to PitchBook.
At that rate, the full year is shaping up to record less than one-third of the exit value created last year, when deals generated more than $75 billion, itself a decline of around 90% from the record highs of 2021.
Exit values dropped to just under $16 billion in 2009, its lowest point over the past 17 years, according to PitchBook, and then steadily increased every year starting in 2016 when exits generated over $65 billion. By 2020, exits crossed the $300 billion mark, then more than doubled to a record-setting $777 billion in 2021.
Exit values will likely only reach $20 billion for the full year, PitchBook said. That implies that the cumulative value of such deals would drop in the second half of the year from the first half. Such an outcome would also represent a 97% decline from 2021's record high.
Two Bay Area companies have had public debuts so far this year — Nextracker, a Fremont-based provider of sun tracking systems for solar panel installations; and Structure Therapeutics, a developer of chronic disease treatments that's based in San Francisco. At least 13 other companies from the region are waiting in the wings.
Car-sharing service Turo filed for an IPO in early 2022, and Sagimet Biosciences and Reddit both filed in 2021. None have debuted yet. Instagram and Stripe have also both seemingly shelved their respective IPO plans.
Rising interest rates and geopolitical instability have contributed to a broad sense of uncertainty and skittishness from investors over the past 18 months or so. Tech companies have also been hit in the public markets, and private companies that raised capital in recent years are facing pressure to reduce cash burn, extend runway, become profitable and justify sky-high valuations.
Venture capitalists have also been investing less money.
Startups in the U.S. pulled in more than $85 billion, or about half of all global venture capital, in the first half of the year, according to PitchBook.
The number of deals made in the U.S. and their total value have remained relatively flat for three quarters, though.
Startups raised just over $40 billion across 3,730 deals in the fourth quarter last year.
And from January to March, startups raised nearly $46 billion across 3,500 deals. Those figures dropped slightly to around $40 billion across 3,011 deals from April to June.
If the industry maintains the same pace of investment in the second half of the year, 2023 will shape up to be on par with the deal making in 2020.
That year, with investors bolstered by near-zero interest rates — and the Federal Reserve flooding capital markets with cash — U.S. founders raised a then-record of more than $171 billion across more than 13,500 deals.
The frenzy continued into 2021, when the number of deals made increased by 40% and investors doubled the amount of capital they deployed to around $347 billion. Signs of a pullback started emerging by the end of that year, though, and investors put in nearly 30% less cash the following year.
Artificial intelligence startups have been capturing new venture capital investments as most other industries have cooled, but even those outsized AI deals haven't been able to reverse the overall venture slump this year.
