Global VC deals declined in Q3 for the second quarter in a row, hitting 3-year lows

04.10.2023 - 06:39 / venturebeat.com

Global venture capital deals declined in the third quarter for the second consecutive quarter, falling to the lowest level since the second quarter of 2020.

Deal value fell to $73 billion, which is lower than the record by more than 65%, according to the latest first look at a report from PitchBook and the National Venture Capital Association (NVCA) upcoming Q3 2023 Venture Monitor.

As regions go, Asia showed the lowest decline, with quarterly deal counts falling just 10% from the quarter before. Europe and Latin America, on the other hand, saw declines of more than 30% based on preliminary data. Europe did, however, show growth in total invested capital, said PitchBook VC analysts Kyle Stanford and Nalin Patel.

They said that exits aren’t climbing back yet on a global basis compared to the recent past. While total exit value did grow from the three prior quarters, it remains well below the highs of a couple years ago and continues to pressure the global dealmaking environment.

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On an annual basis, all global regions are lagging in the fundraising department except for Latin America, which has raised the same amount as 2022. However, fundraising within Latin America is much lower than other regions due to its nascency as a venture market.

“We expect the low fundraising totals from this year to have impact on VC activity in 2024, even as many investors point to next year as a rebound year for the market,” the analysts said.

After several quarters of slow growth in the number of deals completed, the market continued to show a decline in total deal count during Q3, Stanford said.

The most significant declines came at the later stages of VC where the poor exit market has continued to pressure dealmaking. Deal sizes and valuations through the first three quarters of 2023 have also showed significant declines from last year, especially at the late-stage and venture growth-stage.

The median venture growth stage deal size is at its lowest annual point since 2016, while valuations for the stage have fallen to 2018 levels. The continued slow exit market is causing increasing pressure on the stage which sits closest to the exit markets.

The pullback from large institutional investors that have been vital to supporting companies late in their venture lifecycle has made it increasingly difficult for deals to get done, let alone the large-sized deals that many companies need.

The Q3 exit landscape showed little sign of improvement after a languid preceding 18 months, particularly as several high-profile IPOs