Upcoming pressure?
As 2022 came to a close, I tried to keep my expectations in check: If even Instacart was no longer ready to go public just yet, I had to gear up for the dearth of tech IPOs to continue in the first quarter or even the first half of 2023.
However, seed-stage venture capital activity was one of the things I felt reasonably optimistic about for the new year. Sure, public market woes had trickled down to private dealmaking. But while post-Series A deal count and deal volume were impacted, angel and seed-stage investment activity seemed pretty stable.
Well, it seems I was both right and wrong. According to the Q4 2022 PitchBook-NVCA Venture Monitor First Look report, “angel- and seed-stage deal activity remained relatively resilient in 2022, with $21.0 billion invested across an estimated 7,261 deals.” That’s for the bit I was right about: 2022.
It’s for 2023 that things might not bode so well.
“Should the economic downturn continue, we expect this [angel and seed] stage to start to feel pressure due to declining deal activity and investor demand in the early and late stages,” PitchBook warned.
Whether the downturn will continue is beyond PitchBook’s scope and mine, but based on what I am reading, it is a fairly strong possibility.
PitchBook isn’t making its prediction out of thin air. One of the data points the firm highlighted was “four consecutive quarters of declining deal counts,” which “could foreshadow a continued slide in 2023.”
Another factor is that some tailwinds could cease as high interest rates and inflation reshuffle the deck.
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