Venture capital is trending downwards, according to research from Preqin.
Other findings include:
- Deal activity: By the end of Q2 2023, venture capital deal-making has trended downward for the sixth successive quarter with 4,485 deals completed, while aggregate deal value reached USD63.2 billion. The lower numbers are largely being driven by a sharp decline in consumer discretionary and healthcare deals. In terms of deal value, information technology has dragged down the total deal value.
- Exit trends: The number of exits and aggregate exit value are 30.6 per cent and 33.0 per cent lower than their five-year quarterly average, at 419 and USD52.9 billion, respectively, by Q2 2023. Exit pricing for assets has not been as high as in 2021, but if public markets continue to improve, more exit activity should occur in the second half of the year.
- Fundraising: Fundraising remains tough for fund managers looking to raise capital. The number of funds closing has been on a downward trend over the past six quarters, albeit with a slight uptick in the fourth quarter of 2022. Aggregate capital raised has followed a similar trend, with 219 funds raising USD26.1 billion by the end of Q2 2023. Investors remain pessimistic, but continue to deploy capital, although less than in the recent past.
- Funds in market: The significant overhang of funds in market trying to raise capital is affecting how long funds are spending on the road, with the overall time spent raising capital increasing since 2020. This is especially highlighted by the fact that seven per cent of funds took six months or fewer to close in the first half of 2023. This is in stark contrast with 2020, when 38 per cent of funds closed after a maximum of six months on the road.
Michael Patterson, Senior Associate, Research Insights, at Preqin says: “It has been a challenging time for venture capital firms looking to raise new funds. This trend looks to continue as investors have been more discerning with whom they are allocating capital to. Adding to this, the weak exit environment has dimmed appetite for late-stage strategies.”
