The State of the US VC in 1H22 — The Sky is Not Falling

The US VC sector shattered all records in 2021. Before that, 2020 was the best year ever.

Pitchbook has recently published the data on the US VC sector for the first semester of 2022 (1H22). Why is this important? Because, by following the main news outlets, the impression one gets is that the VC sky is falling plagued with down rounds, layoffs, delayed IPOs, drops in multiples following Nasdaq’s downturn, etc.

Well, the overall takeaway has very different colors: 1H22 was not as great as 2021, but it was far better than 2020 for most indicators.

To simplify the comparison over the last three years, I took the semester averages for 2020 and 2021.

1) US VC fundraising seized a new record in 1H22 (+75% over 2021): $121.5B (2022); $69.5B (2021); $42.7B (2020)

2) Dealmaking has kept pace (+73% over 2020): $144.2B; $164.8B; $83.3B

3) Likewise with Late Stage dealmaking (+66% over 2020): $93.8B; $118.1B; $56.5B

4) Valuations have stayed high across all stages, implying that there was not a meaningful change in multiples (Late Stage detailed):

Median pre-money valuation: $105.0M; $100.0M; $60.0M

Average pre-money valuation: $688.6M; $687.5M; $404.2M

5) Fewer down rounds – extensions or belts tightening instead: from 10%+ in 2020 to less than 5% in 2022 (percentage over the total number of rounds)

6) New unicorns: 127 (60% of the global total); 156; 36. On the downside, China, the 2nd largest VC market, gave birth to only 7 unicorns in 1H22, contributing to ditch the global VC numbers

7) Series B dealmaking (the new unicorns to come) is holding up well: $24.3M; $28.4M; $13.1M

8) On the negative side, IPO window closed, keeping exit value depressed: $48.8B; $388.7B; $162.3B

Conclusion

VC investors have a low time preference. They understand the VC has a longer timeframe in order for the top startups to build market roundaboutness.

Economic cycles are a given in a fiat standard world. However, what the 1H22 US VC numbers show is that, even in a trough, the tech momentum is unstoppable.