NEW YORK–(BUSINESS WIRE)–Against a backdrop of geopolitical, supply chain and economic uncertainty, overall global VC investment is falling, but several sectors, including fintech and cleantech, are benefiting from more selective investment.
According to the Q2’22 issue of Venture Pulse — a quarterly report, published by KPMG Private Enterprise, which analyzes key VC deals and trends globally — fintech, cyber security, supply chain management and alternative energy and energy storage opportunities continue to attract significant interest from investors. This despite global VC investment falling to $120.2 billion across 8,420 deals in Q2’22.
The Americas attracted $66.2 billion in VC investment – over half of total global VC investment – during Q2’22, with the US accounting for $62.3 billion of this amount. Europe’s market showed strong resilience during the quarter, attracting $27.2 billion in investment during Q2’22. Despite the second consecutive quarter of decline, VC investment in Europe remained high compared to pre-Q2’21. Q2’22 was the most muted in Asia, falling to an eight-quarter low of $24.5 billion across 2,206 deals.
Investor interest in supply chain and logistics continues to grow as industry challenges continue to have an impact. High global energy prices and increased concerns about energy security have driven investors to look at energy and storage options. Investments in electric vehicles, battery technology and increasingly hydrogen are becoming more attractive.
The US attracted the world’s largest VC deals during Q2’22, including a $2 billion raise from Epic Games, a $1.7 billion raise from Space X and a $1.5 billion raise from Gopuff. With its $1.2 billion raise, Germany-based fintech company Trade Republic took fourth place – the only non-US company to raise a $1 billion-plus round during the quarter. In Asia, the biggest deal in the quarter was an $805 million increase from India-based Dailyhunt.
“With declining valuations, many technology companies underperforming in the public markets, and no end in sight to the level of geopolitical uncertainty, despite other challenges facing the VC market globally, we are beginning to see investors instructing their portfolio companies to conserve cash. ,” said Jonathan Lavender, Global Head, KPMG Private Enterprise, KPMG International.
“During Q3’22, this trend is expected to continue as startups look to survive in an increasingly challenging environment where profitability will be critical.”
Key highlights – Q2’22
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Global VC investment fell significantly, from $165.3 billion on 11,468 deals in Q1’22 to $120.2 billion on 8,420 deals in Q2’22.
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VC investment in the Americas fell from $89.3 billion on 5,034 deals in Q1’22 to $66.2 billion on 3,778 deals in Q2’22. The US accounted for $62.3 billion of investment in 2Q22 in the Americas, down from $81.9 billion in 1Q22.
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VC investment in Asia fell to an eight-quarter low of $24.5 billion across 2,206 deals in Q2’22.
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Despite a drop to $27.2 billion in Q2’22, VC investment in Europe remained quite strong compared to historical trends.
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Global fundraising remained very strong, with $158.6 billion raised at the end of Q2’22 – well on track to surpass the record $252.2 billion in calendar 2021.
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After plunging from $355 billion in Q4’21 to $70 billion in Q1’22, the exit value fell further to just $50.8 billion in Q2’22.
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Global CVC-related investments fell from $76.6 billion in Q1’22 to $49.7 billion in Q2’22.
Global fundraising continues at record pace, driven by activity in the US
Global fundraising activity remained at a record pace at mid-year, with $158.2 billion in fundraising at the end of Q2’22. The US helped lift global fundraising totals, which totaled $121.5 billion at mid-year, compared to the annual record high of $138.9 billion the region saw in 2021. VC investments in cybersecurity, alternative energy, electric vehicles and US battery storage held strong in Q2’22 and is well positioned to remain hot heading into Q3’22.
Fundraising activity in Europe fell at a record pace, with $13.3 billion in fundraising at mid-year, while fundraising in Asia remained very low compared to previous peaks, with $16.9 billion raised in the first half of 2022.
No end in sight for uncertainty, but interest in new technology should grow
Heading into Q3’22, the global uncertainty plaguing the world is expected to continue, which is likely to continue to keep the IPO window closed and VC investment soft. Downsides may become more common as companies are forced to raise funding rounds despite the challenging fundraising environment.
M&A activity globally may increase as investors look for deals among companies experiencing challenges and start-ups in various industries look to consolidate to improve their economies of scale and market positions. In tech, the crypto wave is likely to turn with further consolidation among firms heading into Q3’22 as many try to cope with a large asset sale.
“While there is still dry powder out there, over the next quarter, VC investors will become much more critical of targets and will likely place increasing emphasis on profitability,” said Conor Moorehead of KPMG Private Enterprise in the Americas Region & Partner in KPMG in the USA.
“We’ve been talking about potential consolidations for a while, especially in more mature industries like e-commerce. While the top one or two or three companies in a particular area may continue to be attractive to investors, the rest are likely to see a pullback. This is likely to drive consolidation as companies run out of cash.”
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