When reports on venture capital in 2022 started flooding my inbox this month, my initial reaction was "tell me something I don’t know." It’s clear by now that there was a slowdown, so what’s the point of harping on about it as we enter a new year?
The Point: Confirming Intuition
The point, as often with data, is that we can now confirm what was merely intuition until Q4 actually closed: 2022 saw fewer exits and venture deals than 2021.
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The Decline in Venture Capital
If we had to retain only one fact, it would be the decline in capital invested in startups last year. According to CB Insights, whose State of Venture report is one of our sources today, total venture funding in 2022 amounted to $415.1 billion, 35% less than in 2021.
Deal Count: A More Stable Metric
According to the PitchBook-NVCA Venture Monitor report, deal count was more stable, with 2022’s estimated deal count approaching 2021’s figure. However, looking at quarterly data reveals that Q4 had the lowest deal count of the year.
Venture Capital in Review
Here’s a summary of the key points:
- Total venture funding declined by 35% to $415.1 billion
- Deal count was more stable, but Q4 saw the lowest number of deals
- Exits and late-stage deal-making slowed down significantly
What’s Next?
As we move into 2023, it’s essential to keep expectations in check. Past performance is not indicative of future results, and venture capital can be unpredictable.
Record Fundraising: A Silver Lining
While venture funds did OK last year by one key metric – their own fundraising – record fundraising is encouraging but does not directly translate into investments.
Reasons for Optimism
There are reasons to be optimistic about 2023. For burgeoning companies capable of building business models that reflect current conditions and rely less on venture capital to grow, the frosty environment could wind up being a good thing down the line.
How Long Will It Take?
No one knows how long it will take for things to improve. We’ll be looking forward to more data as the year progresses.
Top Stories
Some of the top stories in venture capital include:
- CB Insights’ State of Venture report: Provides insights into the current state of venture capital
- PitchBook-NVCA Venture Monitor report: Offers a comprehensive overview of the venture capital industry
- Lux Capital’s Josh Wolfe on dry powder vs. wet powder: Highlights the challenge of investing in a downturn
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Related Stories
Some related stories include:
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- Mark Cuban is ready to fund a TikTok alternative built on Bluesky’s AT Protocol: A potential disruptor in social media
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Venture Capital: A Look Ahead
As we move into 2023, it’s essential to keep expectations in check. Venture capital can be unpredictable, but there are reasons to be optimistic about the future.
The Future of Venture Capital
The future of venture capital is uncertain, but one thing is clear – it will continue to evolve and adapt to changing market conditions.
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