Q2 2022 Venture Capital Funding Results
A continued decline but some promising areas
The final tally for the second quarter of 2022 is in and, to no surprise, there was another drop in overall global investment from the high marker level of Q3 2021. Overall numbers came in at about $120 billion dispersed across approximately 7600 deals. The U.S. and Asia accounted for 69% of these exchanges with the former once again heading allotments at 35% of all transactions. These numbers are still well above those seen from the same quarter in 2020, and there are particular trends that appear to bode well for certain groups of companies operating at select stages of growth.
Venture funds are sitting on record amounts that have been accumulated
Current surveys show that venture capital companies have amassed about $550 billion in their coffers that hasn’t been put into play. This amount has eclipsed anything seen in the past and provides an interesting conundrum given the current economic environment. Firms are understandably reserved about the manner in which they may go about creating value given the vast amount of uncertainty about market directions over the next few years. At the same time, investors always want to see their cash put into play thus the balance between making sound decisions and placating those who contributed to their respective funds will be a primary factor in determining how much access companies will have to external assistance in the near and long terms.
Inflation, rising interest rates, and other factors
Numerous elements over the past year have prompted a discernable shift whereby investors have greater leverage over funding processes and outcomes. Valuations will undoubtedly return to norms that were previously marked, and additional forms of leverage that have historically been in play are also making a return to sheets including liquidation scales and additional rights. From the perspective of a company seeking new rounds of funding, it would more than likely be wise to employ an approach that avoids an ill-advised transaction brought about by the desire to garner further capital before the deal balance is even more heavily weighted toward VC’s.
Uncertainty but great opportunity for those who take advantage of domain hesitancy
For the past 20+ years we’ve seen a number of upturns and downturns. This particular shift over the past 6 months is without question highly unique and still holds a fair amount of inherent variability concerning outcome paths and avenues to follow for success. One thing we are certain of, however, is that companies who make A-level hires no matter what might be happening in the economic sphere will always come out ahead in the long term. Making the effort to maintain and perhaps increase headcount during a period of variability will seem counterintuitive to many. For those who secure some of the best talent now they will be well poised to weather any potential errant trends while keeping their organization primed for growth.
