Global VC market falls from $86 billion in Q4'22 to $57.3 billion in Q1'23 as market uncertainty intensifies

US attracts $31.7 billion in VC investment in Q1鈥�23, more than half of global total.
Asia sees VC investment drop to $13.5 billion, lowest level since Q2鈥�15
Alternative energy companies account for many of the largest VC deals in each region.

Global VC investment sank from $86 million across 9,619 deals in Q4鈥�22 to $57.3 billion across 6,030 deals in Q1鈥�23 as the major uncertainties in the market showed no sign of waning, according to the Q1鈥�23 edition of Venture Pulse 鈥� a quarterly report published by 乐鱼（Leyu）体育官网 Private Enterprise on VC trends globally and in key jurisdictions around the world. The protracted war in the Ukraine, increasing interest rates, stubbornly high inflation, domestic and geopolitical challenges, and concerns about the stability of the global banking system all combined to make it a difficult quarter for VC investment across all regions.

The decline in VC investment was particularly stark year-over-year, with the total seen in Q1鈥�23 less than a third of the total invested during Q1鈥�22 ($177.6 billion). Every region saw VC investment fall to levels not seen in years during Q1鈥�23. The $33.1 billion raised in the Americas was the lowest level since Q1鈥�18, while the $9.8 billion raised in Europe was the lowest since Q3鈥�18, and the $13.5 billion raised in Asia was the lowest since Q2鈥�15.

US-based payments company Stripe鈥檚 $6.5 billion raise was by far the largest VC round of the quarter globally, although it came with a steep cut to the company鈥檚 valuation鈥攆rom $95 billion after its last funding round in Q1鈥�21 to $50 billion in Q1鈥�23. After Stripe, US-based alternative energy infrastructure Generate Capital raised the next largest deal ($800 million), followed by China-based EV automaker Zeekr ($750 million), and US-based cycling and running platform Zwift ($620 million). In Europe, UK-based AI-driven open banking platform Abound raised the largest deal of the quarter ($601 million).

It was an extremely challenging quarter for the VC market globally, in part because every region faced similar struggles鈥攊ncluding intensifying market uncertainties. If there was one bright star this quarter, it was most certainly the alternative energy and cleantech sector, which saw companies across regions still attracting large deals.

Conor Moore

Head of 乐鱼（Leyu）体育官网 Private Enterprise in the Americas Region & Leader

乐鱼（Leyu）体育官网 Private Enterprise Emerging Giants Network, 乐鱼（Leyu）体育官网 International

Key Highlights 鈥� Q1鈥�22

Global VC investment was $57.3 billion in Q1鈥�23鈥攖he lowest level of quarterly investment since Q2鈥�17, and a sharp decline both quarter-over quarter (compared to $86 million in Q4鈥�22) and year-over year (compared to $177.6 billion in Q1鈥�22).
VC investment in the Americas was $33.1 billion across 2,542 deals in Q1鈥�23, a decline from $44 billion across 4,050 deals in Q4鈥�22.
VC investment in Asia dropped from $25.5 billion across 2,799 deals to $13.5 billion across 1,773 deals between Q4鈥�22 and Q1鈥�23.
In Europe, VC investment fell from $15.7 billion across 2,512 deals in Q4鈥�22 to $9.8 billion across 1,533 deals in Q1鈥�23.
Global CVC investment was very slow in Q1鈥�23, accounting for $22.8 billion in investment, compared to $42.1 billion in Q4鈥�22.
Global first-time VC financing was very weak in Q1鈥�22, accounting for just $5.76 billion globally.
Global exit value dropped more than 50% quarter-over-quarter, from an already low $46.4 billion in exit value in Q4鈥�22 to $20.3 billion in exit value in Q1鈥�23

Energy and cleantech attract big deals across regions

Despite the global uncertainty, the alternative energy and cleantech sectors continued to attract significant funding rounds - with companies across regions attracting large deals. During Q1鈥�23, the Americas saw an $800 million raise by low carbon infrastructure company Generate Capital, a $525 million raise by carbon and environmental commodities trading company Xpansiv, and a $300 million raise by battery company One.

Asia attracted a $750 million raise by EV vehicle manufacturer Zeekr, a $442 million raise by solar energy technology company SolarSpace, and a $400 million raise by fossil fuels decarbonization company EcoCeres this quarter, while Europe saw a $228 million raise by Germany-based alternative energy leasing company Enpal and a $148 million raise by UK-based One Moto.

Jonathan Lavender, Global Head, 乐鱼（Leyu）体育官网 Private Enterprise, 乐鱼（Leyu）体育官网 International reflected that 鈥淲hile VC investment globally is expected to remain weak in Q2鈥�23, one area we expect to see pick-up is in the area of generative AI. In the wake of the ChatGPT launch, there has been a flurry of interest in the space鈥攚hich will likely drive some interesting investments over the next quarter.鈥�

The report concludes that investment in consumer retail and D2C companies will likely remain dry, whereas alternative energy and cleantech, defence, cybersecurity, and B2B services are suggested to be the most resilient areas of global investment. with generative AI an area that could see a spike in investment.

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E: daniel.caines@kpmg.co.uk

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