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Latest VC trends


Latest VC trends

The latest data on VCs, which provide funding for startups with strong growth potential, point to a decline in the amount of deals and investments concluded in 2022 Q3 due to economic uncertainty while indicating that sectors such as energy, cybersecurity and healthcare will maintain their resilience. 

VC is a type of financing that investors provide to support startups with strong growth potential. This support can be monetary or provided in the form of technical or managerial expertise. The experience, capital and networks that VCs provide contribute to the development of the startups. 

A close look at current trends

So what are the latest VC trends? Which sectors come to the forefront in securing funding from VCs?

  •  CB Insights Q3 2022 State of Venture report points out that global VC funding continued to slide in Q3 2022 with a 34% drop QoQ. Furthermore, the deals dropped from 9,587 in Q1 2022 to 7,936 in Q3 2022, with funding amounting to $74.5 billion. The report also notes that funding reached $329 billion in 2022 so far, indicating a drop from $630.3 billion in 2021.
  •  According to the PitchBook-NVCA Venture Monitor report, the number of deals concluded in Q3 2022 in the US dropped to a historical low since the last quarter of 2020. The report points to complicated macroeconomic trends as a key factor for the observed decline.
  • The decline in Q3 2022 also reflects the downward trend for early-stage venture capital funding in the US. However, the report underlines that the funding provided to early-stage startups in the first three quarters of 2022 is already above historical averages since 2020, representing a durable, positive trend in the industry.
  • The report shows 125 unicorn births in Q1, 87 in Q2, 25 in Q3 of 2022, respectively. Of these most recent 25 unicorns, 14 are based in the USA, 7 in Asia, 3 in Europe, and 1 in Latin America. Furthermore, the first five unicorns that joined the ecosystem in Q3 2022 operate in the automotive, internet technologies, and computer hardware sectors.
  •  According to CB Insights State of Venture report, globally, the top investors by company count in Q2 2022 were Tiger Global Management, Gaingels, SOSV, Insight Partners, and Andreessen Horowitz.
  • PitchBook-NVCA Venture Monitor report notes that the $32.4 billion in equity funds raised by female-founded startups until Q3 2022 exceeded the total amount of 2020. The report anticipates that the number of deals signed with startups of female founders will reach 742 and exceed the total number of 2020.

Industry trends

The findings regarding Q3 2022 also provide an overview of VC distribution by sector. According to data, healthcare, information technologies, and business services top the list. Another noteworthy finding is a 38% drop QoQ in global fintech funding. While the total funding injected into the sector in Q2 was $20.9 billion, this amount dropped to $12.9 billion in Q3. CB Insights State of Venture report shows that retail tech and digital health also saw sharp drops in funding. Retail tech funding recorded a 33% drop QoQ, while digital health funding fell by 31% QoQ in the third quarter of 2022. In this quarter, only 3 retail tech unicorns were born, bringing the total to 212. Similarly, 3 digital health unicorns were born, bringing the total to 105 as of Q3 2022. 

Trends to watch

According to KPMG’s Venture Pulse Q3 2022 report, the turbulent market conditions are expected to continue in the last quarter and into 2023, anticipating VC investors in the US to likely remain very cautious. Another determination of the report regarding VC trends for 2023 is that VC investment is expected to remain relatively resilient in areas like energy, cybersecurity, and healthcare despite global market challenges.