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Global VC investment falls for the fourth consecutive quarter to a near two-year low – reaching $75.6 billion on 7,641 deals in Q4’22

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Global investment continues decline despite a surge in energy deals.

US leads overall investment with $36.2 billion, followed by Asia at $22.6 billion

Europe hardest hit with VC investment falling from $21.2 billion to only $12.9 billion in Q4’22

Global fundraising likely to remain subdued into Q1’2023

LONDON, January 18, 2023-- The latest KPMG Private Enterprise Venture Pulse report shows that global venture capital investment dropped for the fourth consecutive quarter in Q4’2022 - falling from $102.2 billion on 9,767 deals to $75.6 billion on 7,641 deals. Global investment has fallen to its lowest levels since Q2’2019.

The decline comes despite large deals in the energy sector, including alternative energy vehicles, battery technologies, and alternative power generation and distribution technologies as governments seek to secure energy independence and meet their climate obligation.

The Americas and Asia secured the largest deals during the quarter accounting for the largest share of VC investment globally during Q4’22. The US recorded the largest proportion of investment with Asia second, despite attracting three $500 million + megadeals across the quarter. Top deals from China included GAC Aion ($2.56 billion) and SHEIN ($1 billion) with the largest US deals including Anduril ($1.48 billion) and TerraPower ($830 million).

“Overall investment continued to decline this quarter, falling to the lowest levels since Q2’2019. The combination of economic and geopolitical pressures, alongside turbulent capital markets and low IPO activity, have taken their toll on venture capital investment,” said Conor Moore Head of KPMG Private Enterprise in the Americas Region & Co-Leader, KPMG Private Enterprise Emerging Giants Network, KPMG International. “However, we continue to see encouraging levels of investment in the new energy and electric vehicle ecosystems, as venture capitalists continue to align with government initiatives and incentives in these areas deemed critical to energy independence.”

Large rounds by alternative energy companies included US-based nuclear reactor firm TerraPower ($830 million), China-based SPIC Hydrogen Energy ($631 million), Estonia-based renewable energy developer Sunly ($196 million) and Belgium-based hydrogen energy company Tree Energy Solutions ($122 million).

Investment in the electric vehicle space dwarfed most other sectors and included large fundraising rounds by Chinese electric vehicle manufacturer GAC Aion ($2.56 billion), US-based battery technology company Form Energy ($450 million), and China-based Voyah Car Technology ($630 million), US-based battery producer Group14 Technologies ($614 million) and Swedish electric vehicle firm Einride ($500 million).

Key Highlights – Q4’22

• In Q4’22, global VC investment dropped from $102.2 billion across 9,767 deals in Q3’22 to $75.6 billion across 7641 deals in Q4’22.
• VC investment in the Americas fell from $49.6 billion across 4,022 deals in Q3’22 to $39.2 billion across 3,322 deals in Q4’22, with the US accounting for $36.2 billion invested.
• VC investment in Asia dropped from $30.4 billion across 3,052 deals in Q3’22 to $22.6 billion across 2,157 deals in Q4’22.
• Europe’s VC investment fell from $21.2 billion across 2,476 deals, compared to $12.9 billion across 1,936 deals in Q4’22.
• Corporate VC investment declined for the fourth consecutive quarter. Total CVC-affiliated investment fell from $108 billion in Q4’2021 to $36.5 billion in Q4’2022.
• Exit value fell dramatically year-over-year - from $1.427 trillion on 4,174 exits in 2021 to only $308.8 billion on 2,997 deals in 2022. The fall was most notable in the US, where total exit value declined from $753.2 billion to only $71.4 billion.
• ‘Dry powder’ remained at all time highs. Over the course of the year, VC firms raised over $250 billion, the third largest total in the past 10 years. The US led the way, raising a record $162 billion in 2022, albeit on a much smaller volume of funds.

Dry powder expected to help keep VC market stable despite growing uncertainty

Looking ahead to Q1’23, venture capital investment globally is expected to remain subdued, with consumer-focused businesses seeing the most strain. The IPO window, particularly in the US will likely remain closed well into 2023, with little to suggest it will reopen fully in the first half of the year. As companies run out of cash, there will likely be an increasing number of down rounds and an in increase in M&A activity.

“Globally, we continue to see downward pressure on valuations in early 2023, leading many companies to postpone fundraising efforts in hopes of better times ahead,” said Jonathan Lavender, Global Head, KPMG Private Enterprise, KPMG International. “However, these companies can only hold off so long and we anticipate an increase in down-rounds during the first half of 2023 as companies begin to exhaust cash reserves.”

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