The D.C. region remained a hotbed of venture capital investments in the second quarter, as both individual companies and investment funds continued to raise eye-popping sums, according to newly released data.
Although overall investments in local companies declined during the quarter, many individual companies took in more dollars, at a gargantuan average of $177.6 million apiece, versus an average of $147.1 million in the first quarter, according to the most recent PitchBook-NVCA Venture Monitor report, published each quarter by data firm PitchBook and the National Venture Capital Association with Insperity and J.P. Morgan.
Altogether, D.C. companies received an aggregate 76 investments totaling $1.35 billion for the quarter, compared with 104 investments worth $1.53 billion in the first quarter and 87 investments totaling $1.4 billion in last year's second quarter.
Meanwhile, local venture capital, private equity and other investment funds raked in roughly $1.8 billion combined during the first half of the year, the fifth most of any market in the country, according to PitchBook. "Many of those funds closed have been smaller vehicles, but these are very important for the health and sustainability of the local capital market," Kyle Stanford, a PitchBook senior VC analyst, told the Washington Business Journal.
The report's authors predicted that VC activity will remain tepid in the near term nationally “as the threshold for closing deals rises and pricing uncertainty extends to the early stages of the investment cycle." Many have also predicted funding slowdowns this year due to the rising uncertainty and regulatory scrutiny in public markets and as exits become more scarce compared with last year.
But, Stanford said, activity in the Washington region is likely to remain robust, relative to most other markets. “D.C. has consistently been around the fifth- or sixth-most active market in the U.S. on a yearly basis, and we expect this to continue for the foreseeable future,” he said.
Related: See the first-quarter results of the Venture Monitor report for the D.C. region.
Leading the VC and investment funds pack in the second quarter was D.C. software-focused growth equity firm Updata Partners, which closed a $608 million fund in May. Not far behind was D.C. cybersecurity investor Paladin Capital Group, which raised $372 million in a fund that was oversubscribed. The women-run Construct Capital in the District also raised about $300 million to invest in firms in the manufacturing, transportation and logistics sectors.
Among the individual firms that received the biggest VC deals was D.C. climate tech firm Arcadia, which reached “unicorn” status in May — meaning a private company with a valuation of more than $1 billion — thanks to a $200 million Series E investment led by JPMorgan Asset Management’s Sustainable Growth Equity Team. Other big-ticket recipients included the D.C. e-commerce tech firm Upside, which raised $65 million in a Series D equity round and another $100 million in debt financing; D.C. auto refinancing fintech Caribou Financial Inc., which raised $115 in new financing; and Bethesda health care firm Aledade, which raised $123 million that it will use to speed up its national expansion.
Nationally, VC deal-making was noticeably slower than in recent quarters. In the second quarter, a total $62.3 billion was invested in 3,374 deals, the smallest number of deals since the final quarter of 2020. And their total deal value fell by nearly $20 billion from the previous, first quarter.
The second quarter also saw fewer 145 “megadeals” — meaning those of $100 million or more — worth a combined $32.1 billion nationwide. That’s a significant slowdown from the 217 megadeals seen in the previous quarter and 201 that occurred in the second quarter of 2021.
