US venture capital market resilience gives hope to UK

The first nine months of 2022 has seen a record-breaking $151bn pumped into venture capital funds in the US

The first nine months of 2022 has seen $151bn pumped into US venture capital funds, according to research.

The quarterly data insights produced by Pitchbook and National Venture Capital Association (NVCA) show the figure already beats 2021’s record-breaking total of $147bn, showing strong resilience to a gloomy global economic backdrop which has seen the demise of tech stocks.

The condition of the US venture capital market is usually a good indicator of what the UK VC market will look like a couple of months down the line.

The data shows the amount invested in VC deals in the US in the third quarter reached $43bn – 52 per cent less than the same period last year but still more than any quarter pre-pandemic bar Q4 of 2018. The amount invested in US venture capital deals hit $343bn in 2021.

The latest quarter was also the slowest of the year so far in terms of deal count, dropping 20 per cent short of Q1’s record high.

Investments in early-stage healthcare, cleantech, energy and transportation start-ups have particularly benefitted this year. The number of investments in those industries so far this year is more than all of 2020.

Cleantech in particular has cashed in on a concoction of high oil prices and green energy policies with lower costs of AI and computing.

See also: Calculus launches EIS fund for impact start-ups

Late-stage private companies have suffered a different fate, however. The amount raised in the latest quarter was $25bn, a 62 per cent drop from the same period last year.

The exit value for this year has also been disappointing, looking set for a sub $100bn figure for the first time since 2016.

John Gabbert, CEO of Pitchbook, said: “The VC slowdown narrative that has been pervasive in the market this year has finally materialised in the data, with nearly every metric aside from fundraising falling sharply in Q3.

“The VC ecosystem, however, has shown remarkable resiliency in the face of continued economic headwinds, raising record levels of capital and closing an unexpectedly high number of deals.

“In many ways, 2021 was an outlier year, and the VC market is now returning to pre-pandemic levels and long-term trends of steady growth.”

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Dom Walbanke

Dom Walbanke

Dom is a feature writer for Growth Business and Small Business, focused on matters concerning start-ups and scale-ups. He has also been published in the Independent, FourFourTwo magazine and various lifestyle...