Last year, venture capital poured into the tech sector, boosting valuations to the point that once-rare billion-dollar unicorns were replaced by decacorns valued at $10 billion.

In recent quarters, though, the market has deflated due to a complicated mix of market corrections and economic uncertainty caused by the pandemic, supply chain issues, interest rate hikes and record-high inflation.

Venture capital (VC) firms allocated about $80 billion in Q1. By Q2, that figure dropped to $71.9 billion. In Q3, VC deals dropped 40 percent to $43 billion — the lowest it has been in nine quarters, according to the latest PitchBook-NVCA Venture Monitor report.

The report found that nearly $195 billion in venture capital has been allocated in the first three quarters of this year, which is an uptick from the $168.7 billion raised in all four quarters of 2020. However, the VC market is nowhere near the record-breaking $343.6 billion that was doled out last year. 

While venture capital funding is well below what it was last year and earlier this year, the PitchBook report noted that Q3 funding was above historic averages and “part of a durable, positive trend in the industry.”

Q3 2022 VC Funding by City

  • Bay Area: $11.8 billion, down from $22.1 billion in Q2
  • LA: $6 billion, down from $6.8 billion in Q2
  • NYC: $5.7 billion, down from $11.1 billion in Q2
  • Boston: $3.9 billion, down from $5.6 billion in Q2
  • Seattle: $1.6 billion, down from $2.7 billion in Q2
  • Denver: $1.1 billion, down from $1.9 billion in Q2
  • Chicago: $791 million, down from $1 billion in Q2
  • Austin: $701 million, down from $900 million in Q2
  • Source: PitchBook-NVCA Venture Monitor

An estimated 4,073 deals were announced in Q3, which is down from the 4,513 deals recorded in Q2 and the record-breaking 5,049 deals recorded in Q1, according to the report.

Exits are also down. The report tallied only 59 public listings this year, which lags far behind the record-breaking 303 public listings last year and the 145 public listings in 2020. With $14 billion generated across an estimated 302 exit events in Q3, PitchBook expects this year’s total exit value to drop below $100 billion for the first time since 2016. 

“There is room for concern regarding the pace of this year’s total exit value because an extended period of low exit activity could discourage investors from recycling capital back into the VC ecosystem,” the report said.

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