2022-10-19-KPMG_Global-Q3_22_Venture_Pulse_Report–_United_States_94页_4mb

Executive Summary

KPMG's Venture Pulse Q3 2022 highlights a continued global downturn in venture capital investment, driven by economic uncertainty, geopolitical risks, and inflation. Despite a challenging market, the Q3 2022 report identifies notable trends in deal-making, sector focus, and the potential for increased mergers and acquisitions (M&A) as an exit strategy. While fundraising volumes remain robust due to significant dry powder, investments are increasingly concentrated in resilient sectors such as energy, healthtech, and B2B companies. Europe and Asia-Pacific experienced mixed results, with strategic shifts from high-risk consumer startups to value-driven opportunities. Globally, cautious investor behavior is shaping venture capital trends, with early-stage persistence but a heightened focus on profitability.

Key Findings

• Global VC Investment Decline: Global venture investment fell for the third consecutive quarter, totaling $87 billion across 7,817 deals, the lowest since Q2 2020.

• Regional Overview:

  • Americas: Investments declined significantly, with record dry powder supporting late-stage deals despite a pullback in earlier-stage activity.
  • Europe: Hit a seven-quarter low at $18.7 billion across 1,920 deals, driven by macroeconomic headwinds and energy crises.
  • Asia-Pacific: Regional investment decreased for the third straight quarter, with China shifting focus to strategic sectors like electric vehicles and cleantech.

• Sector Highlights:

  • Cleantech, energy storage, healthtech, and B2B solutions continued to attract significant VC interest.
  • Consumer-focused startups saw declining valuations amid economic uncertainty.
  • Cybersecurity and AI-driven businesses remain resilient.

• Exit Activity: Exit transactions dropped precipitously in Q3 2022 with reduced IPO activity and M&A emerging as the dominant route. Dry powder remains a primary driver of dealmaking despite reduced deal volumes.

• Venture Debt: Interest in venture debt financing increased as startups seek alternatives to avoid down rounds or traditional equity dilution.

Global Trends

• Venture Debt Growth: Opportunity rose in 2022 due to pressure on valuations and a focus on profitability.

• Corporate VC: Activity slowed in tandem with institutional VC, dominated by established players in resilient sectors.

• Merger & Acquisition (M&A): Anticipated to rise as a key exit strategy, particularly among companies unable to raise new capital or pursue IPOs.

• Dry Powder Levels: Total dry powder funds reached record highs, providing support for investments despite market pressure.

Regional Overview

1. Americas

• North America experienced the sharpest declines in VC deals and raised totals, with nearly 90% American startups shifting toward profitability-focused business models.
• Canada and Latin America reported strongly subdued levels of activity, especially in the Q3 period.

2. Europe

• Europe witnessed a significant reduction in venture activity after breaking records earlier in the year.
• Nordic countries bucked this trend, propelled by large investments in cleantech, battery production, and cybersecurity.

3. Asia-Pacific

• China, India, and Japan led the region’s downturn, an adjustment toward focused Sectors such as healthcare and ESG.
• Fintech and SME-focused platforms showed notable resilience in fundraising activities.

Outlook for Q4 2022

VC investors are expected to intensify due diligence and focus on resilient business models, prioritizing companies demonstrating stable revenue and cash flow generation. Economic headwinds are projected to continue throughout Q4, leading to further M&A consolidation across markets. Key areas for ongoing investment include AI-enabled tech, cleantech, healthtech, and digital infrastructure — sectors best positioned to weather macroeconomic turmoil.

While deal volumes continue to contract globally, the value of transactions remains intact in healthier segments of the venture market. Overall, the venture environment is cooling, with exit activity dictated increasingly by M&A and selective IPOs. Caution remains the central theme for investors worldwide, with buyers focusing on stability and resilient business models moving into 2023.