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PitchBook-NVCA Venture Monitor Q3 2022
Executive summary
Amid rising interest rates, fewer public listings, and the most complicated macroeconomic trends of the past generation, there is a broad desire to predict expectations in VC markets. With the end of Q3, there are easy answers and there are hard ones.
First, an easy answer: Broadly speaking, Q3 VC activity was below the historic heights of 2021 and early 2022. However, VC isn’t about panicking over quarterly fluctuations, and Q3’s activity is above historical averages and part of a durable, positive trend in the industry.
Some of the high points of 2022 have been seen in the healthcare, clean tech, energy, and transportation industries. Deal counts
across these four sectors at the end of Q3 are close to or above full-year numbers for 2020. Similarly, investments by crossover
investors and corporate venture capital (CVC) funds are all near or above 2020 totals. The mid-Atlantic, Southeast, and
Mountain regions have seen steady growth over the past few years, with all expected to exceed their 2020 totals.
Points of stress in the market are also appearing. This year, exits are down almost 50% against historical norms, with public
listings at record lows. In 2022, there have been just 59 public listings so far, compared with 303 in 2021 and 145 in 2020.
Fundraising is another possible point of tension. While overall figures are strong—the total capital raised at the end of Q3
2022 is $150.9 billion, just 2.6% away from the full-year 2021 record of $147.2 billion—62% of that total is going to 6% of funds.
Mega-funds are nothing new. However, there are questions as to how their continued growth will impact emerging managers
and ecosystems.
While Q3 has clarified several industry trends, its most durable legacy will likely be the passage of the Inflation Reduction Act
and the CHIPS and Science Act. These acts of Congress create huge investments in technology and infrastructure development.
Notably, they make hundreds of billions of dollars of public money available for investment over the coming years. Furthermore,
when combined with other projects such as the State Small Business Credit Initiative, these acts create an environment for
private fund managers to partner with the public sector and academia and develop more-robust entrepreneurial ecosystems
outside of traditional hot spots.
The facts of Q3 paint a mixed picture for the VC industry. Investors report that they are making deals, and there is a consensus
between managers and founders on how to prepare for potential challenges ahead. The market is also becoming increasingly
consolidated and realizing fewer exits than at any time in recent history. Recently enacted federal legislation promises to make
more funding available for managers and founders alike. Tracking the implementation of this legislation is a primary concern.
While some of the provisions in the packages (such as the research and development [R&D] tax credit expansion for startups)
will come into effect as soon as January 2023, other provisions are still far from implementation.
In summary, Q3 can provide reasons for optimism or pessimism, depending on where the viewer is looking. However, it has also
opened the door to a variety of opportunities for those who are paying attention.
3
Sponsored by
NVCA policy highlights
Lawmakers on Capitol Hill wrapped up a busy summer
Inflation Reduction Act
regulatory agenda that targets private funds,
with movement on several legislative priorities.
including the VC industry. Several board members
Below are key policy initiatives for NVCA and their
After a long and winding road, Democrats finally
met with SEC Commissioner Hester Peirce and
state of play.
coalesced around a package of climate, healthcare, and
Division of Investment Management staff in July to
tax provisions that they were able to pass along party
discuss the agency’s private funds proposal and how
lines. Despite a bumpy process, the end result was
it would negatively impact the VC industry.
CHIPS and Science Act
pretty ideal for the VC industry. We were able to avoid
Before departing Washington for the August
significant damaging tax increases on the industry and
Recently, NVCA submitted a supplemental comment
recess, Congress passed the NVCA-supported
secured targeted improvements to climate credits for
letter to address questions that arose during our
competitiveness legislation called the CHIPS and
startups. We also saw a small expansion of startups’
meetings about the true scope of the liability
Science Act. Signed by President Biden, the act
ability to offset payroll tax payments with unused R&D
limitation ban in the private funds proposal. The
represents the largest investment in research,
credits from $250,000 to $500,000.
letter clarified that the proposal goes much further
and referenced how the impact on the VC industry
technology commercialization, and domestic
production in at least a generation.
The legislation includes up to $250 billion for:
• Semiconductor research
Our outreach efforts included dozens of Hill meetings,
would be far more profound by discouraging
two research projects, individualized slide decks
new investments into unproven innovations and
for states and regions, in-state and virtual events
threatening the appropriate risk of actively engaging
and roundtables with policymakers, and significant
and managing portfolio companies.
coalition work with other affected industries.
We are continuing formal meetings with SEC
• Domestic manufacturing
• The establishment of a technology
commercialization directorate at the National
Tax increases considered but rejected during the
officials and policymakers on Capitol Hill and the
process include proposals to:
administration to discuss the full proposal’s negative
impact on the venture ecosystem.
Science Foundation (NSF)
• New test bed facilities for startups and
other entities
• Basic research at the NSF and the Department
of Energy
• A new regional technology hub program
• Programs to promote technology
commercialization and entrepreneurship at the
National Laboratories
• Tax capital gains as ordinary income
• Impose a surtax on those making more than
$5 million
• Create a mark-to-market tax regime
In July, the House passed a revised DEAL Act, a
• Impose an annual tax on private funds
longtime NVCA priority championed by Rep. Trey
based on AUM
Hollingsworth (R-IN) and Sen. Mike Rounds (R-SD)
• Impose a five-year holding period for carried
interest, with major technical issues
• Retroactively limit qualified small business stock to
NVCA has been heavily engaged in this package
since its original introduction. We provided
recommendations and encouraged policymakers
to leverage the unique capabilities of the American
DEAL Act
that directs the SEC to modernize the definition of a
VC fund for purposes of fund registration (read our
statement here).
30% exclusion
• Require companies majority-controlled by private
investment firms to file taxes as a single entity
• Aggregate the revenues of companies majority-
The original bill directed the SEC to consider
secondary investments as qualifying so long as the VC
fund maintained a “predominant” number of direct
startup ecosystem. We are thrilled to see that the
owned by private investment funds for purposes of
investments into private companies and to consider
final bill retains language requiring new company
determining the application of a book minimum tax
investments into other VC funds as qualifying as well.
formation as a primary objective for several programs.
(a 15% minimum tax rate for companies with more
than $1 billion in financial statement income)
Now that the bill has been signed into law, we are
shifting to an implementation strategy with the
We continue to engage and will update NVCA
members with further details as we learn more.
Financial regulatory proposals
various agencies and will begin rolling out a series of
events, collateral, and a more in-depth analysis of the
NVCA has continued engagement on Securities and
bill’s provisions to educate the NVCA membership.
Exchange Commission (SEC) Chair Gary Gensler’s
4
Overview
Deal count higher than expected
US VC deal activity by quarter
6,000
$100
5,000
$80
4,000
$60
3,000
$40
2,000
$20
1,000
$0
0
Q1
Q2
Q3
Q4
Q1
Q2
2017
Q3
Q4
Q1
Q2
2018
Q3
Q4
Q1
2019
Deal value ($B)
Q2
Q3
Q4
Q1
Q2
2020
Deal count
Q3
Q4
Q1
2021
Q2
Q3
2022*
Estimated deal count
*As of September 30, 2022
Deal activity across all stages is
showing more signs of distress,
recording the third consecutive decline
2022 surpasses all years except 2021
US VC deal activity
17,867
in completed deals. Estimated deal
count in Q3 (4,074) is off by almost
20% from the quarterly record high
recorded in Q1 (5,049) and is the lowest
count seen in any quarter since Q4
2020 (3,364). Q3 saw $43.0 billion
9,968
10,964
11,687
12,051
11,416
10,560
13,076
11,871
12,813
8,082
$145.8
$168.7
$343.6
$194.9
2013
$145.1
historical basis.
$89.2
even if the numbers remain high on a
$83.8
2012
amid the global economic downturn,
$86.3
focus on business fundamentals
$49.7
of investor hesitancy and increased
$41.7
a nine-quarter low, cementing a tone
$73.8
invested in VC deals across all stages,
2014
2015
2016
2017
2018
2019
2020
2021
2022*
Deal value ($B)
Deal count
Nontraditional investors continued
Estimated deal count
*As of September 30, 2022
to reduce their activity in VC-backed
startups amid ongoing economic
uncertainty. Notably, deal count
nontraditional investor slowdown,
mega-deals were closed in Q3, the
participation has declined for all
especially by asset managers and PE
lowest total since Q3 2020.
nontraditional investor types except
funds, would be noticeable in the data
for corporate investors, which were
due to the reliance on these institutions
US VC fundraising has set a new annual
involved in more than a quarter
to complete mega-deals—87% of
high through only three quarters
of all completed deals in 2022. In
mega-deals received nontraditional
of 2022. US-based VC funds have
past reports we have noted that a
investor participation in 2021. Just 95
raised $150.9 billion, surpassing last
5
VC-backed IPO index continues underperformance
2022 US VC IPO index*
1.5x
1.0x
0.5x
0.0x
-0.5x
Jan
Feb
Mar
VC IPO Indexed Value
Apr
May
De-SPAC Indexed Value
Jun
Jul
Aug
Sep
Morningstar US Small-Mid Cap Broad Growth Extended Indexed Value
*As of September 30, 2022
year’s previous record and taking the
web-based design platform—the deal
$670.4 billion in exit value. With the
21-month fundraising total above $298.1
is not yet closed. Few options remain
expectation that the current slow
billion. Given public market turbulence
for the growing group of unicorns,
environment will remain, this year’s
and frozen avenues for liquidity, we
as 2022 has produced only 59 public
total exit value is in danger of falling
expected LPs to be concerned about
listings, just one year after a record 303
below $100 billion for the first time
their overexposure to this asset class
VC-backed public listings generated
since 2016.
and the potential for timely returns
year, we are finally beginning to see
that momentum atrophy, as just $29.4
billion in fundraising was added to the
dataset since our Q2 report, the lowest
quarterly total this year.
With just $14.0 billion in exit value
generated across an estimated 302
exits in Q3, there were few bright
spots for the VC exit market. These
figures are in line with exit activity
expectations around 2014 and well off
the highs seen in 2021—$266.8 billion
in exit value was generated in Q2
that year. A highlight of the quarter is
Market quickly swinging back to being investor friendly
US VC dealmaking indicator
Investor friendly
activity. Entering the second half of the
Startup friendly
negatively impacting fundraising
100
90
80
70
60
50
40
30
20
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017
2018
2019
Early-stage normalized smoothed index
surely Adobe’s announced $20 billion
2020
2021
2022*
Late-stage normalized smoothed index
*As of September 30, 2022
acquisition of Figma, a developer of a
6
Diversifying,
educating,
and
Shaping
the future
empowering the VC investor
of venture capital
class to advance the industry
and maximize impact and returns
ventureforward.org
Venture Forward is a 501(c)(3) supporting organization to NVCA.
Venture Forward is a 501(c)(3) supporting
organization to NVCA.
NVCA EMPOWERS
THE NEXT GENERATION
OF AMERICAN COMPANIES
As the leading trade organization
in this country, NVCA provides
a wealth of resources for VCs,
including access to exclusive data,
education, connecting with peers,
and shaping the policy agenda.
Beth Seidenberg
Founding Managing Director
of Westlake Village Biopartners
Become a NVCA member today | www.nvca.org
Angel & seed
Angel & seed activity slides
US angel & seed deal activity by quarter
2,500
$7
$6
2,000
$5
$4
1,500
$3
1,000
$2
500
$1
$0
0
Q1
Q2
Q3
Q4
Q1
Q2
2017
Q3
Q4
Q1
Q2
2018
Q3
Q4
Q1
Q2
2019
Q3
Q4
Q1
Q2
2020
Deal value ($B)
Deal count
Q3
Q4
2021
Q1
Q2
Q3
2022*
Estimated deal count
*As of September 30, 2022
Q3 was a bit less resilient compared
with the first half of the year, when
deals for seed investments were
completed at an unwavering pace. This
Seed deals showing strength
US angel & seed deal activity
7,000
$20
quarter saw a decline of around 18%
from the Q1 high, dropping angel & seed
6,000
$15
5,000
deal activity back to 2020 levels. Seed
companies are relatively less impacted
by public markets than late-stage
3,911
$10
3,000
companies, so the quick shift in activity
2,000
$5
705
nature of the 2021 seed market. Once
number of micro-funds raised since the
beginning of 2021 (779).
1,000
Angel deal value ($B)
Seed deal value ($B)
Angel deal count
2021
2020
2019
2018
2017
2016
2015
0
2014
will find tailwinds from the record
$0
2013
investment climate, seed activity
2012
the market returns to a more normal
2022*
points more toward the unsustainable
4,000
Seed deal count
*As of September 30, 2022
Despite a slowdown in activity, core
data points from seed investments have
remained at the heightened levels set
as the current quarter’s deal size and
more selective in their investments in
in 2021. The median seed deal size for
pre-money valuations were both the
this economic climate, this massive
2022 sits at $2.8 million after Q3, and
highest in our dataset at $3.5 million
growth in seed-stage participation
the median pre-money valuation for
and $10.1 million, respectively.
continues to put upward pressure on
seed investments reached $10.5 million.
deal sizes and valuations. Not only are
These figures aren’t leaning on the
While the strength of valuations could
there more micro-funds, but also larger,
strong numbers from Q1 and Q2 either,
be due to investors in the market being
multistage investors have increased
8
Median angel deal values flat
Seed deal values continue rise
$1.5
$6
Range of US angel deal values ($M)
Range of US seed deal values ($M)
$5.0
$5
$1.0
$1.0
$4.6
$4
$2.8
$3
$0.6
$0.5
$2
$0.3
$1.1
$1
$0.1
$0.0
Average
75th percentile
Median
25th percentile
Average
75th percentile
Median
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
$0
25th percentile
*As of September 30, 2022
their activity. Tiger Global, for example,
do not have estimates for first-time
likely further to fall from an activity
has been a part of 15 US seed deals
financings as we do for other stages of
standpoint, but the growth of the seed
announced in 2022, nearly double
VC, but already our team has captured
and first-financing market over the
the total number of US seed deals the
more first financings than almost any
past several years has lifted the floor
company had participated in previously.
quarter before 2021, and that total is
of expectations. These deals are much
expected to grow. The unexpected
further from macroeconomic volatility,
Congruently, first-time financing data
strength of first-financing activity is
though we shouldn’t expect this stage
shows that Q3 was slower than recent
positive news for the industry.
of companies to remain immune from
periods, though the number of deals
the impacts as headwinds continue.
captured by the end of the quarter was
Given the lag between industry
off by just 5.8% from last quarter. We
narratives and data trends, there is
Seed valuations well above 2021
Nearly $19 billion in first financings YTD
Median US angel & seed pre-money valuations ($M)
US first-financing deal activity
$30
$10.5
$25
$20
$15.7
$15.2
$15.0
$24.6
$18.9
2019
2020
2021
2022*
2022*
2021
2020
2019
2018
2017
2015
2014
2013
2012
2016
Angel
2018
$0
$0
$9.6
1,000
2017
$5
$9.3
2,000
2016
$10
$9.4
$2
4,000
3,000
2015
$3.5
$4
3,497
$15
$8.2
$4.9
2014
$6
$7.3
$8
5,000
3,871 3,780 3,864
3,787 3,735
3,338 3,522 3,466
3,276
2013
$9.0
$6.7
$10
6,000
5,275
2012
$12
Deal value ($B)
Seed
*As of September 30, 2022
0
Deal count
*As of September 30, 2022
9
Early-stage VC
Q3 reinforces negative quarterly trend of early-stage deal activity
US early-stage VC deal activity by quarter
$35
1,600
$30
1,400
1,200
$25
1,000
$20
800
$15
600
$10
400
$5
200
$0
0
Q1
Q2
Q3
Q4
Q1
Q2
2017
Q3
Q4
Q1
Q2
2018
Q3
Q4
Q1
Q2
2019
Deal value ($B)
Q3
Q4
Q1
2020
Deal count
Q2
Q3
Q4
Q1
2021
Q2
Q3
2022*
Estimated deal count
*As of September 30, 2022
The dust had yet to settle as earlystage VC activity trended downward
for the third quarter in a row, with
roughly $13.5 billion invested across
Early-stage deal count on pace to surpass
pre-pandemic figures
US early-stage VC deal activity
5,312
an estimated 1,226 deals. However,
the current year’s early-stage VC
investment is roughly $55.8 billion,
already surpassing the 2020 full-year
figure of $45.0 billion, suggesting
the long-term growth for early-stage
3,225
3,371
3,487
3,165
3,523
3,613
3,753
4,031
3,480
2,713
investment remains positive. Now that
we are well into 2022 and roughly six
capital deployment in early-stage
$25.6
$30.3
$41.6
$44.9
$45.0
$87.6
$55.8
public market volatility has weakened
$26.2
materialize in the data. The continued
$21.7
in prior quarters is slowly starting to
$16.8
March, the reporting lag highlighted
$14.0
months past the inflationary surge in
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022*
Deal value ($B)
deals as investors become more
Deal count
Estimated deal count
*As of September 30, 2022
apprehensive about the large, outliersized deals of the past couple years.
Investors are focusing on investing in
Early-stage investors can no longer
last few quarters resulted in a median
the fundamentals of a startup instead
make investments under the pretense
early-stage deal size of $8.9 million in
of relying on another VC firm to invest
of growth as seen in the robust
Q3, a 19.7% decrease from the prior
at an even higher valuation.
valuation environment of 2021. The
quarter’s median early-stage deal size
increase in investor prudence over the
of $11.0 million. The decrease in median
10
YTD deal values remain afloat despite
QoQ decline
YTD early-stage valuations maintain lead
above historical figures
Range of US early-stage VC deal values ($M)
$25
$20
Range of US early-stage VC pre-money valuations ($M)
$23.8
$160
$23.2
$140
$140.7
$115.0
$120
$100
$15
$80
$10.0
$10
$55.0
$60
$40
$5
$2.4
$25.0
$20
75th percentile
Median
25th percentile
Average
75th percentile
Median
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2014
2013
2012
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Average
2015
$0
$0
25th percentile
*As of September 30, 2022
deal size is likely the result of depressed
value of $5.5 billion. Mega-round deals
long-term trend, yet remains robust for
public market exit conditions finally
accounted for 40.7% of the total capital
strong companies. We expect investors
breaking through the insulated early
invested across early-stage VC in Q3.
will look to mitigate risk by backing serial
stage and affecting valuations. Startup
This quarter’s mega-round activity falls
entrepreneurs, some of whom raise
founders may be opting to raise smaller
short of the 2021 quarterly average of
outsized rounds in the early stage; such
amounts of capital in an effort preserve
42 rounds yet is still above 2020’s figure
is the case with Andreessen Horowitz’s
equity and to simply bridge the gap until
of 17, reinforcing the notion that the VC
reported $350.0 million investment in
the market resumes its strength.
market is returning to the pre-pandemic
Adam Neumann’s latest startup, Flow.
Contrary to the H1 2022 growth
Early-stage capital availability falling
valuations, Q3 exhibited signs of a
slowdown, with a median pre-money
valuation of $46.0 million. This figure
represents a 16.4% decrease from the
Q2 2022 median of $55.0 million and
is more on par with the 2021 full-year
figure of $44.0 million. We expect
early-stage pre-money valuations to
continue their descent through the end
of the year as the market searches for a
new equilibrium.
Evidence of a slowdown in the early
stage can also be seen in the number
Capital supply-demand ratio in the early-stage VC marketplace
Dollars of supply to dollars of demand
of median early-stage pre-money
$14
$12
$10
$8
$6
$4
$2
$0
Q1
Q3
Q1
2017
Q3
Q1
2018
Q3
Q1
2019
Q3
2020
Q1
Q3
2021
Q1
Q3
2022*
Early-stage VC
of mega-rounds completed. 24 earlystage mega-rounds ($100 million+) were
*As of September 30, 2022
completed this quarter, with a total deal
11
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Late-stage VC
Q3 deal value plummets in response to continued depressed exit conditions
US late-stage VC deal activity by quarter
$70
1,800
$60
1,600
1,400
$50
1,200
$40
1,000
$30
800
600
$20
400
$10
200
$0
0
Q1
Q2
Q3
Q4
Q1
Q2
2017
Q3
Q4
Q1
Q2
2018
Q3
Q4
Q1
Q2
2019
Deal value ($B)
Q3
Q4
Q1
Q2
2020
Deal count
Q3
Q4
Q1
2021
Q2
Q3
2022*
Estimated deal count
*As of September 30, 2022
Current avenues for startup liquidity
remain relatively frozen, further
constricting late-stage deal activity in
YTD late-stage deal value ahead of 2020 full-year figure
US late-stage VC deal activity
5,360
Q3, resulting in $24.9 billion invested
across an estimated 1,249 deals. The
4,238
total dollars invested in late-stage
VC decreased by 48.3% from the
3,543
3,082
Q2 figure of $48.1 billion and set a
capacity to generate positive free cash
$112.5
$237.2
$122.5
2013
$90.0
valuations to balloon beyond their
2,628
$92.7
has caused startup headcounts and
2,375
$51.1
2012
historically implemented. Blitzscaling
2,468
$51.6
$28.8
disregarding the scaling processes
$24.9
heightened investor support to grow,
2,385
$53.6
1,925
the surplus of available capital and
2,142
$47.0
record 11-quarter low. Over the past
two years, startups have leveraged
3,707
2014
2015
2016
2017
2018
2019
2020
2021
2022*
Deal value ($B)
flow and loosen their dependence on
Deal count
Estimated deal count
*As of September 30, 2022
investor capital. Depressed public
market comparables have even led
nontraditional investors to internally
VC GPs have been hesitant to mark
The median late-stage deal value
mark down portfolio companies; such
down portfolios due to the impact it
continued to fall through the third
is the case with T. Rowe Price writing
could have on their ability to attract
quarter to $10.0 million, a 33.3%
down its investment in Canva, a unicorn
new fund commitments as well as the
decrease from the 2021 full-year figure
startup developing an online graphic
ability of their portfolio companies to
of $14.6 million. This decrease seems
design platform, by 44% since the
raise subsequent financing rounds at
significant in the context of the prior
end of 2021. Anecdotally, traditional
increased valuations.
year’s activity but is equal to the 2020
13
YTD median and average deal values fall
below 2021 values
YTD median valuations creep closer to
2020 full-year figures
$60
$800
Range of US late-stage VC deal values ($M)
Range of US late-stage VC pre-money valuations ($M)
$700
$50
$582.1
$600
$39.6
$40
$500
$35.0
$30
$400
$322.5
$300
$20
$10
$11.5
$200
$3.1
$100
$0
$91.0
$31.0
Average
75th Percentile
Median
25th Percentile
Average
75th Percentile
Median
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
$0
25th Percentile
*As of September 30, 2022
full-year median deal size, suggesting
portion of the total invested capital to
2021 full-year figures to $91.0 million,
that the repricing of late-stage VC deals
derive from those rounds until public
corroborating the notion that investors
may be falling below the long-term
markets become a viable path to liquidity
are less confident in this area of the
growth trend. Despite the decrease, we
once again.
market. While valuations remain
have yet to see down round activity pick
significantly higher than median
up in the data. Naturally there is a lag in
Furthermore, the impact of depressed
valuations seen in 2020 and earlier, we
reporting that limits our insight into down
exit conditions can be seen in the
expect this figure to continue to decline
round activity as well as the incentive for
softening of late-stage pre-money
as the market resets and public markets
founders to withhold funding information
valuations. Late-stage pre-money
remain volatile.
that could unfavorably portray their
valuations YTD have dipped below
businesses. We expect down rounds to
become more prevalent should current
market conditions continue or worsen
Late-stage capital supply hits low
Capital supply-demand ratio in the late-stage VC marketplace
Alongside the decrease in median deal
sizes, this quarter also saw a drop in the
number of mega-rounds completed.
In Q3 there were 67 mega-rounds
completed at the late stage, with a
total deal value of $11.9 billion. As to
be expected, mega-rounds drive a
significant portion of the deal activity in
the late stage, but that portion of deal
Dollars of supply to dollars of demand
through the end of the year.
$14
$12
$10
$8
$6
$4
$2
$0
value is starting to wane in response to
Q1
the lack of liquidity in public markets.
2017
We expect the increased scrutiny of
Q3
Q1
Q3
Q1
2018
Q3
Q1
2019
Q3
2020
Q1
Q3
2021
Q1
Q3
2022*
Late-stage VC
late-stage startups to result in fewer
*As of September 30, 2022
mega-rounds completed and a smaller
14
Sponsored by
A WORD FROM INSPERITY
DE&I Considerations to Strengthen the Venture
Capitalist’s Portfolio
• Recent changes in awareness of social justice
and the effects of the COVID-19 pandemic have
better working and living conditions may increase
Sonya Mack
human capital risks in VC investments.
Director of Diversity,
increased the need for companies to review and
strengthen their approach to diversity, equity,
DE&I is more than an occasional agenda item,
and inclusion (DE&I).
ancillary program, or problem to be addressed. It
• Venture capital (VC) firms can exemplify
is a strategic business imperative—a key pillar in
high standards of care for women and
successful human capital strategy. When woven
underrepresented populations by calibrating
into the fabric of company strategy, leaders
their own internal DE&I efforts.
view the organization through the powerful
• Portfolio partners can be influenced to improve
lens of caring for their people. They work to
their care for diverse employees when venture
ensure fairness and equity in the development
capitalists raise their investment criteria to
of their workforce and universal employee
include embracing DE&I.
well-being by adopting flexibility, acceptance,
• The benefits that accrue to companies that care
and accommodations for all. They also train
Equity, and Inclusion
Sonya Mack is the
Director of Diversity,
Equity, and Inclusion
(DE&I) Services with
Insperity, and responsible for leading the DE&I
consultative services. Her passion for DE&I has
spanned the course of her career within non-profit
organizations and corporations. Sonya earned her
BBA in organizational behavior and management
from the University of Houston and is certified in
DE&I in the Workplace.
for their people include increased productivity,
and hold managers accountable for their ability
employee loyalty, innovative thinking, and a
to effectively listen and be empathetic toward
strong brand.
their team. This creates a preferred employer
Venture capitalists can empower their portfolio
relationship that elicits employee discretionary
companies to advance fairness for employees
The impact of multiple history-defining political
effort and is difficult to replace by going
from marginalized backgrounds and women.
and economic events and movements taking place
elsewhere.
This will result in employee loyalty, competitive
advantages, productivity enhancements, strong
over the last few years has brought to the forefront
a call for action to eliminate prejudice and
How can venture capitalists integrate DE&I into
public perception, and improved access to
injustice in the workplace. Business leaders and
their portfolios?
suppliers and vendors.
Having DE&I as a strategic competency focuses the
Consider these questions:
investors have begun taking a more intentional
look at opportunities to increase representation
of underrepresented groups (diversity), to ensure
fair and accessible opportunities and resources
for all employees (equity), and to create more
inclusive company cultures (inclusion). For venture
capitalists, evaluating and improving the employee
experience may mean the difference in achieving
their long-term investment goals.
Why should venture capitalists care
about DE&I?
venture capitalist on better deals and enhances the
value they bring to their partners. To create this
• Can you strengthen your investment criteria
internal competency, venture capitalists should
through self-assessment, feedback from
intentionally look within their own organization
portfolio companies, and industry benchmarks?
for opportunities to increase representation of
underrepresented groups, ensure fair access to
resources and opportunities, and create a more
inclusive company culture. This is a process, not a
one-and-done project.
• Do your investment requirements reflect
diverse founders and equitable opportunities
for women and underrepresented groups?
• Do you evaluate the inclusiveness of a startup’s
human capital practices?
• Do you expect partners to establish employee-
With a DE&I competency, venture capitalists
friendly values, cultures, processes, procedures,
Employees’ expectations have been dramatically
can model practices that demonstrate the value
systems, and practices?
changed by pandemic-related challenges, racial
of promoting diverse peoples, viewpoints, and
unrest, and the economic downturn. No longer are
experiences. They can steer portfolio companies
What framework can be used to adopt DE&I into
they willing to tolerate poor treatment or work
to more inclusive strategies by adopting DE&I-
company strategy?
where they feel disadvantaged. The significant
centric investment criteria. They can condition
reduction in the available workforce and a new
deals that influence startups to structure practices
A flash cut adaptation of strategy to a full-on DE&I
willingness to resign from long-held positions for
and strategies that lead to progressive change.
focus is not likely. Such an approach would
15
Sponsored by
likely miss or mistreat most of the specific root
constructed job descriptions that accurately
resource groups and advance the adoption
issues that need addressing. However, remember
reflect work expectations. Annually agreed
of a DE&I committee, expanded recruiting
that employees are increasingly looking for
upon performance objectives should be fair and
perspectives, distributed training opportunities,
real attention, genuine concern for people, and
unbiased. Regular data-supported performance
and the creation of safe spaces for employees to
commitment to these principles.
reviews should fairly evaluate progress and
share ideas and concerns.
provide genuine feedback, including any
DE&I solutions must be thoughtfully developed
developmental needs which in turn result in
and implemented. It begins with changes in
training and development plans.
practices, then underlying policies, and eventually
• Training and development. The level of
Conclusion
At Insperity we follow the example of our founder
being written into overarching strategies
company commitment to DE&I principles can be
and CEO Paul Sarvadi in supporting, valuing,
supported by key metrics that sustain progress.
measured by the developmental opportunities
and caring for our people. We have experienced
afforded diverse employees. Human capital
firsthand the power and economic benefits of a
We suggest using the employee life cycle
strategies should require equal and fair access
diverse and empowered workforce. VC firms can
to guide the transition to a more strategic
to individualized development resources that
strengthen their own companies and introduce
DE&I organization:
help each employee progress and reach their
these benefits to their partner companies by
highest potential. The developmental plan is
elevating DE&I strategies and initiatives.
• Culture of well-being. Create a culture of
inclusion and belonging that boldly affirms
that all people are valued, respected, and
supported. Develop an understanding of the
employee experience, including the varied
impacts from family obligations, economic
struggles, challenges associated with ethnicity,
gender, sexual orientation, and physical or
mental health, among others. Evaluate how the
current company culture treats these issues and
engineer changes where needed to provide due
consideration to individual well-being.
• Attracting and recruiting. Expanding employee
searches to reach more candidates from
underrepresented groups is more practical
now than ever before. Remember, diversity of
thought and experience is powerful. The shift
to remote work has provided employers’ access
a key indicator that people are valued by the
company. Regardless of employee position
or level, turning their specific developmental
needs into strengths will increase their
contribution and bring added value to the firm.
any level is expensive and time consuming.
Reviewing reasons for leaving may reveal that
employees from underrepresented groups
are leaving at a higher rate than others. They
may have felt under-appreciated or that their
progression was capped. While some people
leave for better opportunities, these reasons
should be immediately addressed.
How can a VC firm create a focus on employee
well-being?
The whole intent of infusing DE&I into company
geography. No longer must they try to persuade
strategies is to access the power of fair and
a diverse candidate to move away from their
equitable employee treatment and accrue its
cultural home or family to work onsite.
value to the company. Intentional and successful
strategy development requires clear goals,
first impression of the firm and a key indication
leadership commitment, effective change
of the company’s commitment to their
management, and impactful communications.
individual success. It folds them into the society
During start up, most founders are scrambling to
of their new peers and impresses the culture
establish and secure funding for their company,
upon them. Assigning a temporary mentor or
having little time to consider people-focused
host will help familiarize new workers with the
initiatives. Venture capitalists can bring an
work requirements, resources, and coworkers.
increased awareness of people’s needs and
• Performance and progression. High
performance begins with clear and carefully
your VC firm and your partners, contact Insperity
at: Randy Fisher, Private Capital Development
Director, randy.fisher@insperity.com.
• Employee retention. Replacing workers at
to diverse candidates beyond their immediate
• Onboarding. Onboarding is the new employee’s
For more on bringing the benefits of DE&I to
expectations and suggest ideas to strengthen
human strategies. They can establish employee
16
Insperity has helped
thousands of startups
by providing HR solutions to help them gain a
competitive advantage for talent and providing the
HR infrastructure they need to support their growth.
Insperity believes startups are critical to the vitality
of the American economy, and we’re eager to work
alongside up-and-coming companies who share
that belief.
Regional spotlight
California markets leading the way*
Seattle
Boston
Q3 deal count: 95
Q3 deal value: $1.6B
Q3 deal count: 184
Q3 deal value: $3.9B
New York
Chicago
Bay Area
Q3 deal count: 586
Q3 deal value: $11.8B
Q3 deal count: 81
Q3 deal value: $790.7M
Denver
Q3 deal count: 449
Q3 deal value: $5.7B
Philadelphia
Q3 deal count: 103
Q3 deal value: $681.1M
Q3 deal count: 88
Q3 deal value: $1.1B
Los Angeles
Washington, DC
Q3 deal count: 321
Q3 deal value: $7.1B
Q3 deal count: 86
Q3 deal value: $772.4M
San Diego
Q3 deal count: 67
Q3 deal value: $1.0B
Austin
Q3 deal count: 70
Q3 deal value: $701.2M
Miami
Q3 deal count: 75
Q3 deal value: $1.3B
*As of September 30, 2022
Deal values outside major markets lag
Valuations lower outside of Bay Area
$20
$70
Median early-stage deal value ($M) by CSA
Median early-stage pre-money valuation ($M) by CSA
$60
$15
$50
$40
$10
$30
$20
$5
$10
$0
Bay Area
Boston
New York
Rest of US
Bay Area
Boston
Los Angeles
*As of September 30, 2022
New York
Rest of US
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
$0
Los Angeles
*As of September 30, 2022
17
Sponsored by
A WORD FROM J.P. MORGAN
The evolving venture landscape
“As they contend with ongoing market volatility
We have begun to see compression in private
and declining growth forecasts, startups and
company valuations over the past six months,
investors are still trying to find their footing on
following the sell-off in public equities—and
Head of Research,
valuations. Founders will likely face some tough
tech stocks in particular—that began late last
Commercial Banking
choices in the coming months as they work to
year. With ongoing volatility, both public and
Ginger Chambless is
position their companies for long-term success.
private markets are trying to find their footing
a Managing Director
For those with ample runway, now is a good time
on valuations. If earnings expectations are reset
and Head of Research
to block out the noise and build.”
meaningfully lower in the coming months, it is
—Pamela Aldsworth, Head of Venture Capital
possible valuations could see more downside.
Commercial Banking. In this role, she produces
Coverage for J.P. Morgan Commercial Banking
Either way, companies early in their journey
curated thought leadership content for commercial
should be less hindered with time on their side
After the initial onset of the market
banking clients and internal teams. Her content
to build and grow into a higher valuation. For
downturn earlier this year, we have observed
focuses on economic and market insights, industry
Series B and later, the valuation reset process
several interesting developments.
trends, and the capital markets.
is more challenging given the vastly different
Reforecasting exercises are taking on greater
Ginger Chambless
for JPMorgan Chase
environment since most [of these companies]
Additional contributors:
raised their last round.
Pamela Aldsworth
importance in the current environment given
the outlook for slowing economic growth,
The concerns of venture players have
higher interest rates, and reduced investment
evolved over the course of the year.
activity. The budgeting season is underway,
Head of Venture Capital Coverage
Andy Kelly
Managing Director, Venture Capital Coverage
and we expect many startups will lower growth
One of the most noticeable areas that shifted
expectations and place extra focus on bottom-
was thinking around labor force. Early in the
and markets quickly resumed the up and to the
line stability for the year ahead. It’s not a
year, the war for talent was a top challenge
right trajectory. Now, we could be entering the
growth-at-all-costs environment anymore.
cited by startups, and many were paying up to
acceptance phase for valuations. While down
In software specifically, it’s possible that YoY
recruit and retain engineers and data scientists.
rounds have risen to 7% to 8% in recent months
revenue projections could come down from
As the year progressed, the narrative shifted
from 5% earlier in the year, it’s likely valuations
80%-100% to 40%-60%.
to slowing hiring plans and, more recently,
will continue trending lower, as startups that
outright reductions in [labor] force. On this,
last raised in early to mid-2021 come to market
Also, portfolio triaging is definitely going on
it’s usually best to be decisive and conservative
over the next two to three quarters. Even the
inside the VC world. We are seeing a flight to
so that the remaining team can refocus on the
Seed stage appears to be capitulating after
quality, where the best-performing companies
business without an overhang of additional
exhibiting resilience for much of 2022. In all
are receiving continued investment, in-line
layoffs in a few months’ time. We expect labor
cases, the top end of the market has come
performers are getting bridged to carry out
force reductions across the startup ecosystem
down the most, which logically correlates with
reforecast plans, and underperformers are
to approach 10% to 20% by the end of the year.
the pullback from crossover investors whose
being put to market for the best possible
positioning was concentrated in the
outcome. At this stage, the financial and
Thinking around valuations and liquidity has
reputational strength of the VC firms at
also evolved. Several months ago, it might
the board table will play a meaningful role
have been reasonable to wait out the markets
Lastly, early in the year there was very little
in effecting a sale or funding across any
and pass on additional capital at a flat or down
discussion about recession risk, higher interest
liquidity gap.
round, hoping the pullback was short-lived
rates, or slowing customer demand. With
18
top-tier names.
Sponsored by
negative GDP growth in the US through the first
deals are on the sidelines waiting to test the
Not surprisingly, direct to consumer (D2C) was
half [of the year] and high inflation pinching
market. There has been limited confidence to
a sector that greatly benefited from above-
purchasing power, startups reliant on strong
transact M&A in this climate, as it could be
trend consumer spending on goods during the
consumer spending are facing headwinds. A
viewed as a capitulation or a portfolio-clearing
pandemic. As consumer spending patterns
broader shift in consumer spending patterns
event.
normalize and the risk of recession remains
from goods—which were above trend during
elevated, many companies in the D2C space
2021—to services has been underway in recent
At the same time, Raby indicates that sponsor-
have followed their public comps in a downward
months and likely to persist. Plus, with 300
backed private companies with healthy balance
trajectory, and VC investing in new companies
basis points of interest rate hikes since March
sheets are thinking increasingly about one-
has waned.
and another 100 to 150 basis points possible
to-one partnerships / mergers with similar-
over the next few quarters, this is a meaningful
sized companies to grow ahead of a potential
increase to borrowing costs for young
reopening of the IPO market in 2023. In these
companies with debt.
types of combinations, financial benefits are
being prioritized over an absolute strategic fit.
Our early thinking about the exit market
environment as we head into 2023 is that a
Larger sponsor-backed companies are being
pick-up in M&A is likely.
aggressive in portfolio building and looking
for opportunities to expand platforms via
We will likely need to see volatility in the equity
acquisition versus building solutions to
and credit markets subside from elevated levels
compete. Nontraditional sponsors are looking
for the IPO market to reopen in any meaningful
into entering markets previously seen as
way, according to Michael Millman, Global
unaffordable. For example, sponsors are
Chair of Investment Banking. In the meantime,
spending more time getting up to speed
select IPO issuers who have size and scale,
on cyber and cloud, which are increasingly
combined with a profitable financial profile,
recognized as evergreen sectors.
could evaluate the merits of executing a nearterm IPO. But with limited recent precedents,
Raby expects that a pickup in M&A activity
assessing how IPOs as an asset class price and
will precede a return of the IPO markets and
trade will be another important barometer of
that dual-track late-stage fundraising / M&A
investor sentiment.
processes will be standard practice going
forward. With dilution even more challenging at
Regarding M&A activity within the venture-
compressed valuations, a sale may become the
backed space, JC Raby, Head of Emerging
preferred path.
Technology Investment Banking, notes that
even though deal flow across the technology
Some companies and sectors are still raking in
sector is down an estimated 35% to 45% amid
funding successfully during this time frame,
the choppy market backdrop, strategic dialogue
while other areas are more challenged.
is more robust than ever. Strategic buyers
want to do deep dives on sectors and early /
VC into transformational spaces continues,
growth-stage companies to understand what
including cyber, artificial intelligence, and cloud
might be actionable with calmer waters and
infrastructure. Given elevated geopolitical tensions
less perceived competition from well-funded
and the penetration of tech-enabled solutions
sponsors or more speculative venture investors.
across industries and government, demand for
While a few blockbuster transactions have been
these areas remains exceptionally high.
announced recently, many [small to midsize]
19
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reserved. JPMorgan Chase Bank, N.A.
Member FDIC.
Visit jpmorgan.com/cb-disclaimer for full
disclosures and disclaimers related to
this content.
Biotech & pharma
More than $20 billion invested in biotech &
pharma through Q3
Growing proportion of deals to late stage
Share of US biotech & pharma VC deal count by stage
US biotech & pharma VC deal activity
100%
1,384
Late-stage VC
90%
1,110
874
543
678
633
753
1,010
926
Early-stage VC
80%
Angel & seed
70%
60%
738
722
50%
40%
$23.8
2022*
0%
*As of September 30, 2022
Valuations are up too
values ($M)
valuations ($M)
Median and average US biotech & pharma VC deal
$160
$36.7
$120
$25
$100
$20
$80
$60
Average
Median
*As of September 30, 2022
2020
2019
2018
2017
2016
2015
2014
2013
2012
2022*
2021
2020
2019
2018
2017
$0
2016
$0
2015
$20
2014
$5
2013
$35.0
$40
2021
$9.8 $10.0
2012
$112.0
$45.0
2022*
$30
Median
$144.0
$140
$31.7
$10
2022*
Median and average US biotech & pharma VC pre-money
$40
$15
2021
*As of September 30, 2022
Deal values still growing
$35
2020
2019
2018
2017
2016
2015
Deal count
2014
10%
2013
$38.0
2021
$28.7
2020
2019
$17.9
$20.1
20%
2012
Deal value ($B)
2018
$13.1
2017
$10.2
2016
$11.0
2015
2014
$8.3
$6.4
2013
2012
$5.3
30%
Average
*As of September 30, 2022
20
Enterprise tech
Enterprise tech investment slows heavily
from 2021
Early-stage deals see declining proportion
Share of US enterprise tech VC deal count by stage
US enterprise tech VC deal activity
100%
7,941
Late-stage VC
90%
4,446
4,873
5,147
4,787
5,227
5,749
6,130
5,882
Early-stage VC
80%
Angel & seed
70%
4,748
60%
3,528
50%
$102.4
20%
2022*
0%
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2015
2014
Deal count
2013
10%
2012
$190.0
2021
$82.8
2020
$76.3
$68.8
2019
2017
Deal value ($B)
2018
$42.0
$43.8
2016
$41.3
2015
$37.7
30%
2014
$23.3
2013
2012
$19.6
40%
*As of September 30, 2022
Average deal value falls in 2022
Valuations remain high
Median and average US enterprise tech VC deal values ($M)
Median and average US enterprise tech VC pre-money
valuations ($M)
$30
$28.3
$450
$25.7
$384.4
$373.9
$400
$25
$350
$20
$300
$250
$15
$200
$10
$5.0
$150
$6.0
$100
$5
$34.0 $40.0
$50
$0
Median
Average
Median
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
$0
Average
*As of September 30, 2022
21
Consumer tech
Consumer tech struggles
Seed deals continue decline
US consumer tech VC deal activity
Share of US consumer tech VC deal count by stage
Early-stage VC
80%
Angel & seed
70%
2,534
3,290
3,497
3,320
3,112
2,818
3,204
3,082
2,615
Late-stage VC
90%
60%
$41.7
20%
2022*
0%
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2015
2014
Deal count
2013
10%
2012
$104.4
$52.2
2020
30%
2021
$46.5
$59.7
2019
2017
Deal value ($B)
2018
$27.9
$30.7
2016
$27.6
40%
2015
$20.9
2014
$11.9
50%
2013
*As of September 30, 2022
Average deal value falls back to
pre-pandemic levels
Median consumer tech valuation rises
Median and average US consumer tech VC pre-money
Median and average US consumer tech VC deal values ($M)
valuations ($M)
$30
$400
$27.2
$355.2
$350
$25
$20.2
$298.0
$300
$20
$250
$15
$200
$150
$10
$3.5 $4.1
$100
$33.0
$25.0
$50
Median
Average
Median
*As of September 30, 2022
2022*
2020
2019
2017
2016
2015
2014
2012
2013
$0
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
$0
2021
$5
2018
2012
$9.8
2,147
4,623
100%
Average
*As of September 30, 2022
22
Fintech
Fintech deal count stays high
Deal count proportion remains level
with 2021
US fintech VC deal activity
Share of US fintech VC deal count by stage
2,111
80%
Early-stage VC
Angel & seed
60%
1,155
847
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2015
2014
Deal count
2013
0%
2012
$29.6
20%
2022*
$55.7
2021
$22.0
2020
$14.8
2018
2016
2017
$7.9
$8.6
Deal value ($B)
$17.5
40%
2019
709
$8.0
741
2015
$5.4
2014
$2.4
540
2013
2012
$1.8
367
672
Late-stage VC
1,511
1,208
1,145
100%
*As of September 30, 2022
Deal values on the way down
Average valuation remains above
$400 million
Median and average US fintech VC deal values ($M)
Median and average US fintech VC pre-money valuations ($M)
$35
$30
$472.6
$410.2
$500
$32.2
$24.9
$400
$25
$20
$300
$15
$200
$10
$6.0
$5.9
$100
$5
$40.0
$45.0
Average
Median
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2012
2022*
2021
2020
2019
2018
2017
2016
2014
2013
2012
2015
Median
2013
$0
$0
Average
*As of September 30, 2022
23
Venture debt
Venture debt surpasses $22 billion in value
US venture debt activity
3,691
3,238
2,668
2,730
2,586
3,137
2,857
2,113
1,925
1,705
1,388
$7.5
$8.1
$11.6
$17.3
$15.0
$14.5
$25.6
$33.2
$33.2
$32.7
$22.8
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022*
Deal value ($B)
Deal count
*As of September 30, 2022
Fourth consecutive year above $20 billion
Healthcare debt slows from past years
US tech venture debt activity
US healthcare venture debt activity
795
3,084
2,631
2,544
2,117 2,095
2,190
2,356
1,579
516
1,636
1,314
376
580
637
673
883
766
543
457
386
$3.0
$5.6
2018
2022*
$3.7
2017
$6.1
$2.0
2016
2021
$2.4
2015
$7.0
$2.4
2014
*As of September 30, 2022
2020
$2.1
2013
Deal value ($B)
$5.0
$1.2
2012
Deal count
2019
$20.8
2022*
$19.4
2018
$28.0
$10.8
2017
2021
$12.6
2016
$22.8
$13.8
2015
2020
$8.8
2014
$25.8
$6.4
2013
Deal value ($B)
2019
$6.3
2012
1,028
Deal count
*As of September 30, 2022
25
70% of venture debt going to late stage
Early stage sees shrinking portion of loans
100%
100%
Share of US venture debt deal value by stage
Share of US venture debt deal count by stage
Late-stage VC
Early-stage VC
Angel & seed
*As of September 30, 2022
Median late-stage loan value falls
Range of US early-stage venture debt rounds ($M)
Range of US late-stage venture debt rounds ($M)
$25
$14.0
$20.8
$10.6
$10
$13.0
$13.9
Average
75th percentile
Average
75th percentile
Median
25th percentile
Median
25th percentile
*As of September 30, 2022
$1.1
$1.1
2021
2022*
2020
2019
$0
2018
$0.5
2017
$0.7
$4.0 $3.8
$5
2016
$2.4
2015
$2.1
2014
2020
2019
2018
2017
2016
2015
2014
2013
2012
$0
$15
2012
$2
2022*
$4
$17.0
$10
2021
$6.3
$6
$7.3
$20
2013
$16
$14
$8
2022*
*As of September 30, 2022
Early-stage loans growing larger
$12
2021
2012
2022*
2021
2020
2019
2018
0%
2017
0%
2016
10%
2015
10%
2014
30%
20%
2013
30%
20%
2020
40%
2019
40%
2018
50%
2017
60%
50%
2016
60%
2012
Angel & seed
70%
2015
70%
Early-stage VC
80%
2014
80%
Late-stage VC
90%
2013
90%
*As of September 30, 2022
26
Female founders
YTD capital invested in female-founded
companies exceeds 2020 full-year figures
YTD deal count is on pace to exceed 2020
US VC deal activity in companies with all-female
founder teams
US VC deal activity in companies with at least one
female founder
4,430
1,132
3,092
1,666
2,032
2,235 2,122
2,473
2,730
771
3,092
2,811
481
396
1,282
483
550
742
719
646
441
$3.6
2022*
$8.0
$3.1
2018
2021
$2.2
2017
$3.3
$1.4
2016
*As of September 30, 2022
2020
$1.9
2015
Deal value ($B)
$3.8
$1.7
2014
Deal count
2019
$1.3
2013
$0.8
$32.4
2022*
2012
$57.1
2021
$20.1
2018
$23.4
$15.9
2017
2020
$10.8
2016
$24.7
$12.5
2015
Deal value ($B)
2019
$9.9
$6.9
2013
2014
$5.2
2012
278
Deal count
*As of September 30, 2022
YTD proportion of all-female-led deals
sees small downtick
Amid the economic downturn, femalefounded companies are receiving less capital
US VC deal count
US VC deal value
Female-founded company deal count as proportion of total
Female-founded company deal value as proportion of total
20%
30%
26.4% 25.5%
25%
17.2% 17.2%
18%
16%
14%
20%
12%
15%
10%
8%
0%
0%
2.4% 1.9%
All female founders
At least one female founder
All female founders
*As of September 30, 2022
2020
2019
2018
2017
2016
2015
2014
2013
2012
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2%
2022*
5%
6%
4%
6.8% 6.7%
2021
10%
At least one female founder
*As of September 30, 2022
27
All-female founder teams experience slight
decline in proportion of first financings
YTD proportion of late-stage deal
count increasing
Share of US VC first financings by founder gender
Share of US VC deal count for female-founded companies
by stage
100%
All male
founders
90%
100%
Late-stage VC
90%
Early-stage VC
80%
Mix
80%
All female
founders
Angel & seed
70%
70%
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2012
2022*
2021
2020
2019
2018
2017
0%
2016
0%
2015
10%
2014
10%
2013
30%
20%
2012
30%
20%
2016
50%
40%
2015
50%
40%
2014
60%
2013
60%
*As of September 30, 2022
YTD proportion of deal value in angel &
seed stage sees an increase over prior year
Bay Area leads the US for female-founder
investment
Top five US CSAs by capital raised for companies with allfemale founder teams
Share of US VC deal value for female-founded companies
by stage
100%
Late-stage VC
Combined statistical area
Capital raised ($B)*
90%
Early-stage VC
Bay Area
$5.5
80%
Angel & seed
New York
$4.9
70%
Los Angeles
$1.9
60%
Boston
$1.0
50%
Philadelphia
$0.6
40%
*As of September 30, 2022
30%
20%
New York leads the US in deal count
10%
Top five US CSAs by deal count for companies with all-female
founder teams
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
0%
*As of September 30, 2022
Combined statistical area
Deal count*
New York
775
Bay Area
590
Los Angeles
377
Boston
159
Washington D.C.
103
*As of September 30, 2022
28
Nontraditional investors
Nontraditional investors continue slowing deployment to VC
US VC deal activity with nontraditional investor participation by quarter
2,500
$80
$70
2,000
$60
$50
1,500
$40
1,000
$30
$20
500
$10
$0
0
Q1
Q2
Q3
Q4
Q1
Q2
2017
Q3
Q4
Q1
2018
Q2
Q3
Q4
Q1
Q2
2019
Deal value ($B)
Q3
Q4
Q1
2020
Deal count
Q2
Q3
Q4
Q1
2021
Q2
Q3
2022*
Estimated deal count
*As of September 30, 2022
Nontraditional investors have
outsized impacts on trends within
venture, especially when looking
Deal value participation surpasses $145 billion
US VC deal activity with nontraditional investor participation
6,530
at total deal value. In recent years,
large nontraditional investors—asset
managers, sovereign wealth funds, and
3,779
the top of the market. They participated
began to show the slowdown that the
$108.3
$129.6
$271.6
$145.1
2014
$109.9
2013
$59.1
from nontraditional investors finally
$58.9
2012
market conditions would be easily seen
within venture data. Q3 deal activity
3,216
2,952
$60.2
a pullback from these investors due to
2,347
$26.9
This is a major reason we have said that
1,883
$22.3
investment within the venture market.
3,089
2,822
2015
2016
2017
2018
2019
2020
2021
2022*
Deal value ($B)
Deal count
industry expected. After 1,921 deals were
investor involvement. This data point,
as with many others in this slowdown, is
still higher than any quarter before 2021.
Q4 2020 received the highest amount of
nontraditional investment activity to that
point, a now lowly 1,115 deals.
Estimated deal count
*As of September 30, 2022
completed in Q1, Q3 saw roughly 1,400
completed rounds with nontraditional
4,102
$48.0
in 91.8% of mega-deals in 2021, which
accounted for $195.1 billion in total
5,037
4,239
PE firms—have participated heavily in
Except for corporate venture capital
stood at 58.5% and 43.6%, respectively,
(CVC), deal counts of all nontraditional
in 2021. These declines are heavily
investor types have fallen faster than the
influenced by the lack of large, outsized
broader venture market in 2022. Deal
deals reliant on nontraditional capital.
value participation has fallen even more
precipitously. PE firms have participated
The lack of liquidity for late-stage
in just 48.3% of deal value in 2022 and
companies has strained the strategies
asset managers just 34.9%. Those figures
that they have deployed in the venture
29
Closing in on 2,000 deals led
Crossover participation falling fast
US VC deals led or solely funded by nontraditional investors
US VC deal activity with nontraditional and crossover
investor participation
1,582
2,757
869
Deal count
$62.5
2022*
$67.8
2020
$157.0
$41.9
2018
2017
2016
Deal value ($B)
*As of September 30, 2022
818
711
2019
691
$45.8
$22.7
2015
467
$28.1
$17.6
477
$23.5
377
371
2014
$5.9
266
2013
$80.3
2022*
$4.7
$150.7
2021
2012
$65.8
$66.5
2018
2020
$32.6
2017
$57.1
$27.0
2016
Deal value ($B)
2019
$31.5
2015
$22.3
$12.5
2013
1,409
1,245 1,304
1,850
209
2014
$8.9
952
2012
783
1,156
1,605
2021
1,798
1,761
Deal count
*As of September 30, 2022
market in recent years. Elongated
Corporate investors have helped
averse, at least lessening their appetite
holding periods for the largest private
maintain deal activity for the
for deploying large amounts of capital
investments from hedge funds and
nontraditional investor group. CVC has
into single transactions. Non-cash
mutual funds—because of liquidity
participated in 25.6% of VC deal count
return potential for CVC does provide
regulations and redemption timelines
and 45.1% of deal value YTD; both these
an incentive to continue investment, as
for investors—can cause strategies to
figures are in line with past yearly highs.
creating an ecosystem around current
become overweight to VC. While we
Corporate investors have reaped record
product offerings can boost a company’s
don’t believe many funds are up against
profits in recent years, bolstering their
moat from competitors.
this barrier yet, the strong markdowns in
ability to continue private investments.
public markets have reduced the appetite
However, the fragile economy is likely
for high-value venture deals for now.
to make these investors more risk-
CVCs keep deal participation high
Proportion of US VC deal count by nontraditional investor type
30%
24.6% 25.6%
25%
20%
16.7%
15%
5%
Proportion of US VC deal value by nontraditional investor type
70%
58.5%
60%
47.0%
50%
14.4%
40%
10.5%
30%
11.0% 9.8%
20%
12.6%
10%
Deal value participation falls for all investor types
43.6%
31.3%
8.4%
10%
1.0% 0.9%
0%
48.3%
45.1%
34.9%
25.8%
3.8%
CVC investor
Other tourist investor
PE investor
Asset manager
CVC investor
Government/SWF
Other tourist investor
*As of September 30, 2022
PE investor
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
0%
Asset manager
Government/SWF
*As of September 30, 2022
30
Exits
Exit activity shows little sign of rebounding this year
US VC exit activity by quarter
$300
600
$250
500
$200
400
$150
300
$100
200
$50
100
$0
0
Q1
Q2
Q3
Q4
Q1
Q2
2017
Q3
Q4
Q1
2018
Q2
Q3
Q4
Q1
Q2
2019
Exit value ($B)
Q3
Q4
Q1
Q2
2020
Figma exit value ($B)**
Exit count
Q3
Q4
Q1
2021
Q2
Q3
2022*
Estimated exit count
*As of September 30, 2022
**Announced exit on September 15, 2022
$14.0 billion in exit value was generated
across an estimated 302 exit events in
Q3, with few bright spots to speak of.
YTD exit activity sets expectation of a five-year low
US VC exit activity
1,868
Adobe’s announced acquisition of Figma,
a developer of a web-based design
an extended period of low exit activity
could discourage investors from recycling
2012
2013
2014
Exit value ($B)
capital back into the VC ecosystem.
Exit count
Should the current environment remain,
to fall below $100 billion for the first time
population of unicorns as well, adding
further pressure on the market. The likely
exit path for unicorns has been the public
market, as few corporations are able and
willing to buy such highly valued targets.
2019
2020
2021
2022*
Figma exit value ($B)**
Estimated exit count
*As of September 30, 2022
**Announced exit on September 15, 2022
we expect this year’s total exit deal value
since 2016. There remains a growing
2018
1,092
$85.4
2017
1,227
$781.5
2016
of this year’s total exit value because
1,280
$324.5
2015
1,239
$268.8
1,073
$101.9
is room for concern regarding the pace
1,020
$70.2
exit environment remains lethargic. There
1,113
$77.1
exits, this quarter showed the VC-backed
942
$74.7
Based on the $14.0 billion of completed
894
$128.4
antitrust scrutiny before it is closed.
1,133
$113.0
though it will likely come up against
$132.4
platform, is a positive for the industry,
The overarching narrative of the frozen
in the public eye. The lack of liquidity
IPO market remains, with just five
through public markets could put
companies exiting via traditional IPOs
pressure on startups to return to equity
this quarter. Access to liquidity is critical
markets for additional financings and
to both startups and their investors, and
accept investment at lower valuations
IPOs provide much-needed financing to
compared with prior financing rounds,
startups to continue their growth, albeit
severely diluting current shareholders.
31
Almost 50% of YTD exit value generated
by acquisitions
YTD share of exits via acquisition pushes
above prior year’s record low
100%
100%
Share of US VC exit value by type
Share of US VC exit count by type
Buyout
90%
Buyout
90%
50%
40%
40%
2012
2022*
2021
2020
2019
2018
2017
0%
2016
0%
2015
10%
2014
10%
2013
30%
20%
2012
30%
20%
*As of September 30, 2022
2020
60%
50%
2013
60%
2022*
Acquisition
2021
70%
2019
Acquisition
2018
70%
2017
Public
listing
2016
80%
2015
Public
listing
2014
80%
*As of September 30, 2022
Until recently, special purpose acquisition
listings in Q1 2021. Much of the remaining
returning $1.6 billion to shareholders
companies (SPACs) were an active option
SPACs that have yet to complete
after it evaluated more than 100 targets
to create liquidity for investors. Their
acquisitions are nearing their two-year
and failed to complete an acquisition.
pervasiveness in the market has all but
time limit, at which point shareholders
Although some of the initial acquisition
disappeared as a result of increased
can opt to have their investment returned;
targets may have fallen through, publicly
scrutiny and proposed regulation by the
such is the case with two SPACs launched
listed SPACs represent sidelined capital
SEC. Only three SPACs completed listing
by Chamath Palihapitiya’s firm, Social
that is positioned to support distressed
this quarter, a far cry from the peak of 281
Capital, which announced that it will be
startups during slowdown.
Seed stage sees majority of YTD US
VC acquisitions
Median acquisition exit value remains
above historical figures
Share of US VC round count by round series where next round
Median US VC exit value ($M) by type
is an exit via acquisition
$800
D+
C
$600
B
$300
30%
$200
20%
$100
10%
$0
$66.6
2012
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
0%
$175.0
Acquisition
*As of September 30, 2022
Buyout
$100.0
$65.0
2022*
Angel
$353.6
2021
40%
$400
2020
Seed
2019
50%
$500
2018
A
2017
60%
2016
70%
2015
80%
$722.5
$700
2014
90%
2013
100%
Public listing
*As of September 30, 2022
32
Fundraising
YTD US VC fundraising exceeds prior year’s record high
US VC fundraising activity
1,139
824
768
570
488
644
652
314
337
$23.3
$22.4
$38.2
$43.0
$51.2
$44.8
2012
2013
2014
2015
2016
2017
744
593
Capital raised ($B)
$60.5
$71.9
$88.4
$147.2
$150.9
2018
2019
2020
2021
2022*
Fund count
*As of September 30, 2022
Given public market turbulence and frozen
avenues for liquidity, we expected LPs to
be concerned about their overexposure
to this asset class and the potential for
Billion-dollar funds set record high
Share of US VC fund count by size bucket
$1B+
100%
timely returns negatively impacting
90%
$500M-$1B
fundraising activity. However, US VC
80%
$250M-$500M
fundraising has set a new annual high of
70%
$100M-$250M
60%
$50M-$100M
fundraising narrative has been centered
50%
Under $50M
on the last year’s momentum and the
40%
funds already in discussion prior to the
30%
economic downturn. Entering the second
20%
$150.9 billion, exceeding the 2021 fullyear figure by $147.2 million. Much of the
half of the year, we are starting to see
that momentum atrophy, yet fundraising
remains relatively strong. $29.4 billion was
added to the fundraising total since last
10%
0%
2012
2013
2014
2015
2016
2017
quarter’s report. LPs may feel compelled
2018
2019
2020
2021 2022*
*As of September 30, 2022
to maintain their allocations with GPs to
secure access to future funds and avoid
costly due diligence efforts to identify new
billion, or 86.7% of Q3’s total invested
HC/FT, successfully closed funds with
managers later.
capital, was committed to 66 funds
more than $1 billion in commitments,
led by established managers. What’s
highlighting the fundraising advantage
Further examination of Q3’s fundraising
more, this quarter some of the largest
of GP incumbents. Going forward we
activity shows a large divide in the
players in the space, including Bessemer
expect higher concentrations of capital
success of established managers and
Venture Partners, Battery Ventures,
committed to established managers and
emerging managers. Roughly $22.0
Lightspeed Venture Partners, and Oak
a greater prevalence of larger multistage
33
Investors look to experienced fund
managers to mitigate risk
US VC cumulative dry powder is at an alltime high
Share of US VC raised by emerging or experienced managers
100%
90%
80%
US VC dry powder ($B) by vintage
Experienced firm
fund value ($B)
$300
Emerging firm
fund value ($B)
$250
Total
2022
70%
2021
2020
$200
60%
50%
2019
40%
2018
Overhang
by vintage
$150
2017
$100
30%
20%
2016
2015
$50
10%
2014
Cumulative overhang
0%
*As of September 30, 2022
2022*
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2021
2022*
2020
2019
2018
2017
2015
2016
2014
2013
2012
$0
*As of June 30, 2022
funds increasing the throughput of deals
mega-deals or unicorns. Aiding the VC
into the ecosystem. Much of those returns
through the venture lifecycle.
market’s outlook is the estimated $13.0
are likely derived from holdings in prior
billion in net cash flows to investors
IPOs that only recently cleared their
The surplus of roughly $290.1 billion in dry
through the first half of this year, a high
lockup period or were finally sold by GPs,
powder is a testament to the strength of
amount considering the fast pace of
highlighting the need for exits to remain
this asset class and its continued growth.
contributions during the period. LPs are
strong to further boost the VC market.
It should be noted that the majority of
continuing to generate strong returns
Moreover, those cash flows bolster the
dry powder will target more-traditional
from prior investments, supporting the
attractiveness of established managers
stages of venture, with less invested in
prospect of that capital being recycled
and will reinvigorate investor participation.
Lethargic first-time fundraising activity
presumed to fall below 2014 levels
Micro-fund closings slow from 2021
US VC micro-fundraising activity
US VC first-time fundraising activity
498
307
221
330
Capital raised ($B)
Fund count
Micro-fund value ($B)
*As of September 30, 2022
$5.0
$4.5
$6.8
$3.3
2019
2020
2021
2022*
2021 2022*
$4.9
$18.3
2020
2018
$8.6
2019
$4.1
$13.7
2018
2017
$12.5
2017
281
287
$3.1
$10.1
2016
$2.9
$6.9
2015
2014
$4.3
2014
$2.3
$5.4
2013
$9.2
$3.0
2012
338
167
2013
149
100
$1.9
108
323
303
287
2016
236
$3.3
213
$2.4
110
202
211
2012
180
259
2015
246
Micro-fund count
*As of September 30, 2022
34
Methodology
Deals
We include equity investments into startup companies from an outside source. Investment does not necessarily have to be taken from an
institutional investor. This can include investment from individual angel investors, angel groups, seed funds, VC firms, corporate venture firms,
corporate investors, and institutions, among others. Investments received as part of an accelerator program are not included; however, if the
accelerator continues to invest in follow-on rounds, those further financings are included. All financings are of companies headquartered
in the US, with any reference to “ecosystem” defined as the combined statistical area (CSA). We include deals that include partial debt
and equity.
Angel & seed: We define financings as angel rounds if there are no PE or VC firms involved in the company to date and we cannot determine
if any PE or VC firms are participating. In addition, if there is a press release that states the round is an angel round, it is classified as such.
Finally, if a news story or press release only mentions individuals making investments in a financing, it is also classified as angel. As for seed,
when the investors and/or press release state that a round is a seed financing, or it is for less than $500,000 and is the first round as reported
by a government filing, it is classified as such. If angels are the only investors, then a round is only marked as seed if it is explicitly stated.
Early stage: Rounds are generally classified as Series A or B (which we typically aggregate together as early stage) either by the series of stock
issued in the financing or, if that information is unavailable, by a series of factors including: the age of the company, prior financing history,
company status, participating investors, and more.
Late stage: Rounds are generally classified as Series C or D or later (which we typically aggregate together as late stage) either by the series
of stock issued in the financing or, if that information is unavailable, by a series of factors including: the age of the company, prior financing
history, company status, participating investors, and more.
Nontraditional investors: “CVC” includes rounds executed by established CVC arms as well as direct equity investments by corporations into
VC-backed companies. “PE” includes VC deals by investors whose primary classification is PE/buyout, growth, mezzanine, or other private
equity. “Crossover” investors are a subset of nontraditional investors—specifically asset managers, hedge funds, mutual funds, and sovereign
wealth funds—that have been active in VC investment across any stage. They are referred to as crossover because these investors are likely to
be participating at the late stages directly prior to an exit.
Venture debt: The venture debt dataset is inclusive of all types of debt products raised by VC-backed companies, regardless of the stage
of company. In mixed equity and debt transactions, equity is excluded when the amount is of known value. Financings that are solely debt
are included in this dataset, though not incorporated into the deal activity dataset used throughout the report. Mixed equity and debt
transactions will be included in both datasets.
Exits
We include the first majority liquidity event for holders of equity securities of venture-backed companies. This includes events where there
is a public market for the shares (IPO) or the acquisition of majority of the equity by another entity (corporate or financial acquisition). This
does not include secondary sales, further sales after the initial liquidity event, or bankruptcies. M&A value is based on reported or disclosed
figures, with no estimation used to assess the value of transactions for which the actual deal size is unknown. IPO value is based on the premoney valuation of the company at its IPO price. One slight methodology update is the categorical change from “IPO” to “public listings” to
accommodate the different ways we track VC-backed companies’ transitions to the public markets. To give readers a fuller picture of the
companies that go public, this updated grouping includes IPOs, direct listings, and reverse mergers via SPACs.
Fundraising
We define VC funds as pools of capital raised for the purpose of investing in the equity of startup companies. In addition to funds raised by
traditional VC firms, PitchBook also includes funds raised by any institution with the primary intent stated above. Funds identifying as growthstage vehicles are classified as PE funds and are not included in this report. A fund’s location is determined by the country in which the fund’s
investment team is based; if that information is not explicitly known, the HQ country of the fund’s general partner is used. Only funds based
in the United States that have held their final close are included in the fundraising numbers. The entirety of a fund’s committed capital is
attributed to the year of the final close of the fund. Interim close amounts are not recorded in the year of the interim close.
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