US Venture Market Maintains Momentum

The huge deals which characterised 2021 are not keeping up their pace this year as investors are unsurprisingly adopting a more cautious approach to the largest deals in the market.

Deal count has maintained relatively high level across all stages, as seed stage businesses have pushed recent highs this year at an estimated 1,400 deals, according to PitchBook data.

Persistent momentum throughout the past six months brings about a continuous flow of new deal announcements, a positive sign for the market despite the current economic downturn.

However, deal value has significantly decreased across all stages, with Q2 of 2022 becoming the first quarter since Q4 of 2020 to close less than $77 billion in completed deal value, with slightly over $62 billion secured.

With over $230 billion in dry powder, referring to marketable, low-risk and highly liquid securities, and close to 3,000 funds being secured and closed since the start of 2019, these trends in deal value can be expected to persist until there is a better sense of security across the market and more confidence in investor attitudes.

US venture capital fundraising reached just above $120 billion for the second year in a row, with a strong presence from established fund managers in the first half of this year pushing capital to record levels, as 203 funds worth $94.7 billion were closed throughout the first six months of 2022.

Already at this stage in the year, 30 funds have closed on at least $1 billion in commitments, with eight more funds than the total number of closed funds in 2021, closing in the first half of 2022.

Though this activity is likely being kept up from the huge deal momentum of 2021, it is nevertheless a hugely encouraging sign when it comes to the availability of capital throughout the uncertainty which this economic turbulence will bring.

In terms of exits completed, this year’s second quarter was very similar to the first, but the most significant change throughout the last two years is a total lack of traditional IPOs.

In 2021, close to 86% ($667.1 billion) of the record exit value ($777.4 billion) was produced through public listings of companies who are backed by venture capitals, emphasising the effect a closed IPO window can have on the industry.

Special Purpose Acquisition Company, or SPAC, mergers faced tough conditions throughout the second quarter, leading the total number of public listings closed in 2022 to a mere 42, representing a concerning period for the billion-dollar exit companies, as public listings have been an important source of cash for them.

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