Image: © Steven/Stock.adobe.com
Pitchbook and NVCA data shows that the US has seen the lowest VC deal count in three years in the third quarter of 2023.
Venture capital (VC) funding in the US has fallen to its lowest level in six years in terms of venture deal value, according to latest data, indicating a boom that started midway through the pandemic is well and truly over.
Figures collected by Pitchbook and the US National Venture Capital Association (NVCA) and published in the Venture Monitor report earlier this week show that the country has also seen the lowest deal count in three years for the third quarter of 2023.
And this comes even as direct effects of the pandemic have largely worn off and a new buzz has been created in the industry around the potential of generative AI. According to the report, one of the reasons investors have been cautious is geopolitical turmoil, especially around Ukraine.
“From generative artificial intelligence to geopolitics, the number of effectively unprecedented factors impacting the market today means that investors are still searching for equilibrium in an economy that is in flux,” the report reads.
And this is not taking into account the ripple effects of the current Israel-Hamas conflict, which will inevitably have a small but palpable bearing on the tech funding market.
“The last 18 months have seen a level of tumult in the economy that would have been unimaginable just a few years earlier, but amid stormy seas, VC remains well positioned to ride the waves,” the report adds.
“There is no expectation that dealmaking for US [venture capital] will shift during Q4 and the market should continue to operate as it currently is.”
According to the report, large deals – such as those valued over $100m – have become increasingly uncommon. Meanwhile, pre-seed and seed funding in the US is also at a three-year low, with early-stage companies only pulling in $3.2bn across an estimated 1,214 deals.
“In an investor-favoured deal-making environment, VCs have slowed their pace of investment, which allows them to conduct more thorough due diligence and uncover red flags that may have been previously overlooked,” the report goes on.
But federal programmes, such as the Inflation Reduction Act and the CHIPS and Science Act are providing additional sources of capital to fill the gaps where VCs are unable or reluctant.
“Given the more discerning environment, many start-ups that were backed in 2021 are unlikely to get the same warm reception when they next need to raise,” said John China, co-head of innovation economy and commercial banking for JP Morgan, one of the sponsors of the report.
In contrast, Irish tech companies raised more than €963m in VC funding in the first half of this year, according to data released by the Irish Venture Capital Association. The record amount represents a 24pc increase over the €778m raised in the first half of 2022.
10 things you need to know direct to your inbox every weekday. Sign up for the Daily Brief, Silicon Republic’s digest of essential sci-tech news.
