Venture capital shifts gears | Global finance magazine

Venture capital is moving away from unicorns and towards mature companies.

The venture capital industry recorded historic numbers in 2021. The U.S. venture capital industry invested $329.9 billion last year, roughly double the deal value of 2020, according to Pitchbook, a venture capital database.

Other regions have seen similar trends, with Europe posting over $110 billion in venture capital investments in 2021, accounting for 18% of the global venture capital industry. As a result, venture capital has become an essential component of private funds, institutional investors and family office alternative investment portfolios.

In recent years, the boom in the venture capital industry has disproportionately increased venture capital investment in the seed and start-up stages. Rising multiples and higher valuations of tech companies in both private and public markets have encouraged venture capitalists to gain exposure to early investments, allowing them to dominate seed rounds.

Yet falling public markets, private tech company valuations and more limited exit options have forced venture capital funds to reassess their investment strategy and the type of companies they invest in, focusing more on more advanced companies before the IPO. Global venture capital funding in the second quarter of 2021 fell 30% to $120 billion from the first quarter, according to a KPMG report, which had a significant impact on phased funds and companies. starting. The United States, the largest venture capital investment market, was down 24% in the second quarter from the previous one. According to Crunchbase, seed funding for European startups in the second quarter of 2022 fell 9% year-over-year.

The trend, in fact, had already started in 2021, when investment in mature businesses doubled from the 2020 investment record, according to Pitchbook. Notable late-stage investments around the world in 2022 include SpaceX, an aerospace company that raised $1.7 billion, and Epic Games, an entertainment software company that raised $2 billion despite a challenging macro environment. .

Other venture capital jurisdictions have seen similar dynamics, where total venture capital investments have declined, but investments in early-stage companies have remained high. In the UK, for example, SumUp, a fintech company that enables credit payments for small businesses, raised around $626 million – a major funding round, given the substantial drop in appetite. to invest in the first fintech companies in 2022.

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