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Global VC funding continues to decline marking the 2nd largest quarterly drop in a decade

Global VC funding continues to decline marking the 2nd largest quarterly drop in a decade
Dino Kurbegovic

The second quarter of 2022 had a considerable slowdown, making it the first quarter since the beginning of 2020 to have a large reduction in venture capital (VC) financing.

Namely, $108.5 billion were raised across 7,651 deals done in Q2, marking this as the second biggest quarterly percentage drop in funding in a decade, according to a report by CB Insights.  

Funding drop QoQ. Source: CBInsights.

Meanwhile, the U.S.-based companies accounted for half of all funding, with the biggest winners in Q2 being Epic Games, SpaceX, and Intersect Power, to name a few. However, despite some big wins, investors are shying away from signing checks for startups due to difficult macroeconomic conditions and global market turmoil. 

Slowdowns are also expected to continue throughout 2022 as the threshold for closing deals rises and the investment environment remains uncertain.

Funding drops 

Deals, including mergers and acquisitions (M&A) dropped for the first time in 8 quarters, to 2,502 deals. Similarly, initial public offerings (IPOs) and special purpose acquisition companies (SPACs) dropped by 15% and 26% quarter-on-quarter (QoQ), respectively. 

In addition, fintech companies accounted for less than a fifth of all funding for the first time since Q4 2020. On the other side of the ocean, Europe saw a 13% drop in funding compared to the last quarter, although it represented the smallest drop among the major regions. 

The creation of new unicorn companies, a startup with a valuation of at least $1 billion, fell significantly in Q2, while the U.S. and Europe remained the best incubator spaces for unicorns, accounting for over 70% of all unicorns created in Q2. 

State of unicorns. Source: CBInsights

Growth equity investors have seemingly pulled back, evident in the decline of VC funding, along with the general market turning down. 

Finally, even though the numbers are down, the funding remains at historically high levels, exceeding 2020 in dollar volumes in almost all aspects.  

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