Year-to-date venture capital investments in Minnesota have cratered compared to the first half of last year, but the situation could shape up to be stronger than preceding years.
Deal value for the first two quarters throughout Minnesota exceeded $437 million, less than half of the $1.2 billion of activity in the first half of last year, according to data from a recently published Pitchbook-NVCA Venture Monitor report. In the first half of this year, 92 deals were made compared to 105 from the same timeframe last year.
Last year saw a remarkable amount of money flowing compared to prior years. The first half of the preceding eight years never exceeded $450 million. Besides last year and the $446 million of invested capital in the first half of2019, 2023 is outpacing all pre-pandemic years.
Minnesota’s drop in the first two quarters of this year compared to last year was more dramatic than the national rate. Statewide deal values slumped 64%, compared to a national decrease of 46%. But the state saw a smaller drop in deal amounts, a decrease of about 12% compared to a national drop of about 34%.
National deal activity was $85.6 billion in the first half of this year, with more than 6,500 deals noted in Pitchbook’s data. Deal activity has stayed roughly flat nationwide in the last few quarters, remaining elevated over pre-2021 levels.
“Our estimates show that both early-stage and venture growth saw deal count increases in Q2, though deal value for both continues to be much lower than anticipated,” Pitchbook’s Lead VC Analyst Kyle Stanford wrote in a statement about national trends. “What this tells us is that likely many of these deals are being used to increase cash runways with as little dilution as possible, rather than raise a full round in a down market.”
Nationally, the report says exit value is on pace to finish the year just over $20 billion, which would be the lowest in the past decade by almost $50 billion. Minnesota is in line with this trend, with three exits in the first half of this year totaling $2 million. The amount is the lowest its been in years. For comparison, the first half of last year saw $434 million in exit value. In the first half of 2021, exit value exceeded $10 billion in Minnesota. (Minnesota saw several high-priced IPOs in 2021, including Bright Health Group Inc., Agiliti Inc. and Miromatrix Medical Inc.)
The report calls the current market “the most investor friendly in a decade,” which it notes will “pressure valuations and increase dilution for funders.”
