NVCA: Startups faced headwinds in the Q1 U.S. venture market

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According to preliminary results from data collected by Pitchbook and the National Venture Capital Association (NVCA), startups ran into financial difficulties while raising money from US venture capitalists in the first three months of 2022.

The change in economic conditions is an indicator of backwardness and therefore NVCA believes that this change will be more reflected in the coming quarters. The full report will be released later in the Pitchbook-NVCA Venture Monitor.

Economic woes include volatile public markets, the Fed’s long-awaited rise in interest rates and the ongoing war in Ukraine. Because of this the venture market has changed from its constant “top-to-right” movement. This has led to a significant reduction in the number of initial public payments, an important outlet for VC-backed companies and their investors, while the number of unicorns globally has grown to over 1,000.

The NVCA said the economic situation created by near-zero interest rates over the years has fueled the growing interest and activity of unconventional investors in the private markets. These investors and they have big capital
Many VC trends today have major forces. For many reasons, the venture market sits at a crossroads, entering this time of uncertainty as a much different market than before the global financial crisis (GFC) or the dot-com bubble.


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Despite these headwinds, many areas of VC data appear to be relatively unsafe. Private data lags behind public markets, and venture figures were softer in Q1 than many expected due to market volatility. The first lending closed at near-record speeds, with nearly 200 VC mega-deals (કદ 100 million or larger in size) completed, and new quarterly highs set in proportion to the number of deals completed with CVC participation.

“We expect the next two quarters to see a change in the venture ecosystem shown in the data. That said, we can already see some areas where the market is softening, especially when compared to the enthusiasm of the last few years, “NVCA said.

Public market performance and economic uncertainty led to a break in VC exit value. Following the poor performance of the public market for growth assets, the IPO of VC-backed startups is on the verge of closing completely during the first three months of 2022, and the SPAC Combination Deal performs only marginally well.

This is in stark contrast to the public outcry in 2021, which coincided with the 2000 frenzy. The longevity of this quiet period will be important for the health of the VC liquidity environment no matter how much the VC exit value is concentrated in the public list. In the last two years, NVCA said.

The effects of the turbulent market have begun to show in the last phase. The size and value of the deals are declining as the companies closest to the public market want to raise capital, which reflects the public valuation on them. Unconventional investors, who are heavily involved in the final stages, are also likely to soften their activity. The NVCA said the VC deal would significantly affect the value of these players after years of record investments.

Fundraising is set to begin in 2022 with the recent record-breaking pace of fundraising, which has already raised more than $ 70 billion in commitments. Although only a small portion of that total is funded, the added dry powder will help further protect the venture market from immediate, major disruptions. Delays in raising funds will be seen last in the data, as funds can raise capital long before they are declared closed.

“We anticipate that emerging managers will have a more difficult time raising funds in the near future to rebalance their portfolios as LPs and raise funds for well-known, or more established, investors and managers,” NVCA said.

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