Venture capital’s “next big thing” may just be weathering a period of austerity.
Globally, in the fourth quarter, VC firms raised $20.6B in new funds, according to The Wall Street Journal. For context:
- That’s the first Q3-Q4 decrease since 2009, a 65% drop from Q4 2021, and the worst fourth quarter since 2013.
The fourth quarter also saw limited partners (who back VC funds) invest in the fewest funds of any fourth quarter — 226 — since 2012. (They backed 620 in Q4 2021).
Why the drop? Big-picture, macroeconomic conditions like rising interest rates and inflation have weighed heavily on the tech industry.
This has slowed the pace of investing, and created fewer opportunities to back funds. Further, fewer tech companies are going public, typically a source of cash that limited partners use to reinvest in venture funds.
Limited partners have also become more selective, per WSJ, backing just 141 funds headed by first-time managers in 2022, down 59% YoY and the lowest number since 2013.
