While earlier reports on declining venture capital (VC) funding were signaling even greater turmoil in VC markets, it seems to have finally arrived in Q3 2022. Namely, with $74.5 billion in global VC funding in Q3 2022, a nine-quarter low.
These numbers indicate a 34% quarter-over-quarter (QoQ) drop, the largest quarterly drop in a decade, and a decline of 58% compared to the peak seen in Q4 2021, according to the latest CBInsights report published on October 11.
Dealmaking also fell through by 10% to reach ‘only’ 7,936 deals, with US firms still dominating, accounting for 49% of all global funding or $26.7 billion across 2,866 deals in Q3 2022.
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Unicorns fall
Private companies valued at $1 billion or more, also referred to as Unicorns, were not springing up at a previous rate. Moreover, Q3 saw only 25 unicorn births, the lowest since Q1 2020, with the US accounting for 14 out of the 25 births.
Retail tech funding, the fintech sector, and global digital health deals declined across the board. Retail tech saw a 33% QoQ decline, despite the number of deals actually increasing by 5%. Similarly, the fintech sector contracted with 1,160 deals accruing $12.9 billion, the lowest numbers since Q4 2020.
Finally, the digital health sector fell to its lowest in five years, raising $5 billion across 419 deals, with the US accounting for 58% of all deals.
VC funding in Q3 synopsis
At the moment, it is unclear whether the bottom has been reached when it comes to VC funding or are the Q3 results more tied to a summer slowdown. With pressures in VC markets created by the record capital raised in 2021 and storing of ‘dry powder’ with decreased investments in 2022, the next year of VC funding could be big, depending, of course, on the global macro picture.
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