Global VC deal counts and values experienced a decline in the second quarter of the year, marking a departure from the previous plateau observed in the market.
Both Europe and Asia witnessed a slowdown in activity, exerting downward pressure on the overall figures. The value of completed deals has remained stagnant for several quarters, significantly below the peak levels seen a couple of years ago.
Notably, the absence of active participation from major investors such as crossovers, private equity firms and sovereign wealth funds has hindered the completion of large-scale deals that previously contributed to record-breaking deal values.
Furthermore, exit activity in the global market continued to remain subdued, with “the $51bn of global exit value was the second lowest since Q1 2018,” said Kyle Stanford, senior analyst, US venture lead, at Pitchbook and one of the report authors.
The availability of public market opportunities has been limited, and increased scrutiny from antitrust regulations has sidelined significant acquisitions.
Additionally, global inflation and heightened geopolitical tensions among key venture markets have further constrained the exit landscape.
In Europe, the decline in venture capital deal value persisted throughout Q2 2023, reflecting a sluggish dealmaking environment.
The number of completed deals decreased compared to the previous quarter, as the current market slump influenced fewer transactions. Prolonged due diligence processes, limited availability of capital, and a focus on managing funding runways have collectively impacted deal activity within the European venture capital ecosystem.
Moreover, macroeconomic challenges, including persistently high inflation, sluggish economic growth, and elevated interest rates, have dampened overall financial market sentiment across Europe.
Within the European market, exit activity stalled in Q2 2023, with few VC-backed companies actively seeking liquidity due to unfavorable market conditions.
Startups and investors have opted to delay their exit plans, as valuation uncertainty and market volatility persist.
“Large exits and public listings have been rare in 2023, and this could persist in H2 2023,” commented Nalin Patel, lead analyst, EMEA private capital at Pitchbook.
Fundraising efforts in Europe and North America have experienced a slowdown, contributing to lower global fundraising totals for the year.
Although Asia’s fundraising remains on par with 2022 in terms of fund count and value, it is significantly lower than the levels witnessed in 2021.
The challenging exit market worldwide presents unfavorable conditions for general partners (GPs) seeking to raise funds, as limited distributions from exits impede the recycling of capital into venture strategies.
Looking ahead, the combination of sluggish dealmaking, limited exit opportunities and tough fundraising conditions will likely persist in the venture capital landscape.
GPs may face difficulty in raising capital at the same rate as previous years, as limited partners (LPs) prioritise commitments to potentially lower-risk funds managed by established fund managers with strong track records.
The Pitchbook report is available .