Global Venture Capital investment slows, but market remains strong
Total VC investment during Q1’22 touches $144 billion, despite a drop from a record high during Q4’21
VCs investment in India reaches $7.9 billion on over 300 deals
Bengaluru, NFAPost: Global VC investment during Q1’22 reached $144.8 billion, higher than all, but the four consecutive record-breaking quarters seen during 2021 – making for a robust result, despite the decline, according to the KPMG’s Venture Pulse report, covering Q1’2022.
The quarterly report, published by KPMG Private Enterprise, analyses key VC deals and trends globally in key jurisdictions around the world.
While total investment remained strong, the number of VC deals dropped considerably – from 10,775 deals in Q4’21 to 9,349 in Q1’22 – as geopolitical and economic factors combined to create a storm of uncertainty in the market.
The Russia-Ukraine war, rising inflation and interest rates, turbulence in the global capital markets, ongoing supply chain challenges, and surging cases of Covid-19 in a number of jurisdictions likely contributed to a slowdown in deal-making activity as VC investors enhanced their caution and focused more on due diligence.
VC investment declined in both the Americas and Asia during Q1’22. VC investment in the Americas fell from $103.3 billion in Q4’21 to $77.6 billion in Q1’22, while VC investment in Asia dropped from $55.2 billion to $32.6 billion. Only Europe bucked the downward trend, experiencing a modest increase from $31.5 billion in Q4’21 to $31.7 billion in Q1’22.
Key Global Highlights – Q1’22
Global VC investment dropped from a high of $191.9 billion across 10,775 deals in Q4’21 to $144.8 billion across 9,349 deals in Q1’22.
VC investment in the Americas fell from $103.3 billion across 4,628 deals in Q4’21 to $77.6 billion across 4,138 deals in Q1’22. The US accounted for $70.7 billion of Q1’22 investment the Americas ($95.4 billion of investment in Q4’21).
VC investment in Asia dropped from $55.2 billion across 3,139 deals in Q4’21 to $32.6 billion across 2,712 deals in Q1’22.
Europe saw a slight increase in VC investment during Q1’22, attracting $31.7 billion across 2,219 deals, compared to $31.5 billion across 2,705 deals in Q4’21.
Global first-time VC financing was soft in Q1’22, accounting for just $12.6 billion.
CVC-affiliated investment rose in Europe, accounting for $14.4 billion in Q1’22 compared to $12.5 billion in Q4’22. CVC-participant investment in Americas dropped from $43.7 billion to $30.8 billion, while Asia-based CVC also declined – from $33.3 billion to $18.2 billion quarter-over-quarter.
Exit value dropped considerably quarter-over-quarter, with $122.3 billion in exit value in Q1’22, compared to $344.2 billion in exit value in Q4’21.
Highlights from India
India attracted three of the largest rounds during Q1’22. VC investment in India slowed somewhat in Q1’22 relative to record totals during the second half of 2021.
However, VC investors continued to show interest in a wide-range of sectors, including e-commerce, fintech, edtech, social platforms, and gaming.
The rapid maturation of key sectors in India, combined with the significant number of market entrants, is starting to drive M&A activity as competition for market share heats up.
In India, while investors are expected to grow more cautious given rising commodity prices, increasing interest rates, and heightening global geopolitical uncertainty, the amount of money available in the market will likely help moderate the impact heading into Q2’22.
Fintech and e-commerce will likely remain very attractive to investors, while interest in agtech is expected to grow considerably given the country’s large agricultural sector
Commenting on the India findings, KPMG Partner and National Leader – Private Equity Nitish Poddar said one of the sectors poised to attract big VC investment in India in the near future is agritech.
“While right now it is mostly smaller players involved in the space, ultimately it has the potential to become one of the biggest VC plays in the country. Almost half of the population is engaged in farming and agriculture-related activities, so any technologies that can help improve yields, make farming processes more efficient, and increase profits to farmers have enormous potential,” KPMG Partner and National Leader – Private Equity Nitish Poddar.
Despite the significant uncertainty plaguing the VC market globally, VC investment is expected to remain relatively stable in Q2’22 thanks to a significant amount of dry powder. VC investors will likely continue to be cautious, focusing on late stage companies and proven bets. This could cause concern for startups looking for first-time financing or at early stages of their growth trajectory.
