Global venture capital investment dropped for the fourth consecutive quarter in Q4’2022 from $102.2 billion on 9,767 deals to $75.6 billion on 7,641 deals, the latest KPMG Private Enterprise Venture Pulse report shows . 

Global investment has fallen to its lowest levels since Q2’2019. The Americas and Asia secured the largest deals during the quarter accounting for the largest share of VC investment globally during Q4’22. The US recorded the largest proportion of investment with Asia second, despite attracting three $500 million megadeals across the quarter. Investment in the electric vehicle space dwarfed most other sectors and included large fundraising rounds.

 “Globally, we continue to see downward pressure on valuations in early 2023, leading many companies to postpone fundraising efforts in hopes of better times ahead. However, these companies can only hold off so long and we anticipate an increase in down-rounds during the first half of 2023 as companies begin to exhaust cash reserves,” said Jonathan Lavender, Global Head, KPMG Private Enterprise, KPMG International.

VC investment in India remained slow quarter-over-quarter as VC investors, primarily investors from the US, continued to take a wait-and-see approach given global macroeconomic uncertainties.

 While VC was relatively sluggish, PE activity remained high in India during Q4’22, highlighting the ongoing attractiveness of India’s startup economy. VC investment in India is expected to remain soft in Q1’23, before starting to pick up in Q2’23 — in part due to India’s strong growth and consumption expectations. VC investment in agtech is expected to grow considerably over the next 12-24 months as start-ups in the space mature and attract larger funding rounds.

Commenting on India’s trends, Nitish Poddar, Partner and National Leader, Private Equity, KPMG in India, says, “There’s so much entrepreneurship in India and investors see this. A lot have been betting on microfunds as a way to get their feet on the ground to identify diamonds early — and this has really worked well for some larger VC funds. Given the dollar values involved, microfunds are also easier to raise. Heading into 2023, there’s no doubt microfunds are here to stay. They’ll be what helps incubate very early-stage companies and get them to that next level.”

Looking ahead to Q1’23, venture capital investment globally is expected to remain subdued, with consumer-focused businesses seeing the most strain, according to KPMG.

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