Venture capital funding continues its march downward after a stellar 2021 for risk capital. Obviously, this is due to a deteriorating global economy, Giga high inflation, and central banks needed to battle rising prices by making money more expensive.
CB Insights shared recently that global venture funding delivered the biggest quarterly decline in a decade.
During Q2 2022, 7,651 deals raised $108.5 billion in comparison to Q1 when 8990 firms raised $141 billion. Q4 2021 was the high point for venture funding as over $171 billion was raised.
Regarding Fintechs, long a hot sector for risk capital, the report states that the first time since Q4 2020, Fintech startups accounted for less than a fifth of all funding.
As has been frequently the case, the US raised the most in venture funding during Q2 2022 at $52.92 billion, followed by Asia at $27 billion and Europe at $22.7 billion.
Crunchbase corroborates the drop in venture capital funding with slightly different numbers.
According to their research, VC funding tanked by 26% in Q2, even more disappointing, as on$120 billion was raised versus $162 billion in Q4 2021. Comparing year-over-year numbers, the numbers are just as bleak. VC dropped by 27% as $165 billion was raised in Q2 2021.
We are already hearing about some firms raising capital in down rounds and multiple companies have cut staffing to stem the burn. You can expect this to continue until the markets feel we have bottomed – inflation under control and interest rate increases paused or perhaps heading in the other direction. While this may be grim news, the strong should survive and thrive and there will be some opportunities for firms with stronger balance sheets to pick up people and platforms at a discounted price. Consolidation eventually happens.