NVCA: U.S. venture investments cooled down in Q1 after record 2021

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Venture capital dealmaking activity and exits slowed in the first quarter after a record-breaking 2021, according to the Q1 2022 PitchBook-NVCA Venture Monitor.

In stark contrast to the flurry of public listing activity in 2021, IPOs and exits of VC-backed startups came to a near-complete halt during the first three months of the year with only $33.6 billion in exit value posted after three consecutive quarters over $192.0 billion.

That’s no accident as the war in Ukraine started on February 24 after weeks of tension that affected global markets. And investors don’t take as many risks in tense global environments.

It is evident that the uncertainty felt in the broader markets has affected venture liquidity markets more rapidly compared with dealmaking figures, the report said.

Investment activity remained strong, with the first quarter’s $70.7 billion in deal value representing the fifth-highest total in PitchBook’s database. Deal sizes and valuations have begun to slow, however, as the companies closest to the public market see public valuations reflected on them as they look to raise capital.

Nontraditional investor participation, a significant driver of top-line trends over the past few years, is on track to set a new quarterly record but may face headwinds in the coming months as public market volatility continues and the Federal Reserve raises interest rates.

Any softening in nontraditional investor activity will likely significantly affect VC deal value after years of record investment from these institutions. In contrast to the exit market, VC fundraising maintained the momentum of recent record years