An article we liked from Thought Leaders Kevin Dowd and Peter Walker of Carta:

Carta's State of Private Markets: Q4 and 2022 in review

The global economy took a downward turn in 2022, leaving behind 2021’s environment of easy money and soaring valuations.

The U.S. venture capital market followed suit. Venture deal count for private companies on Carta in 2022 declined 29% year over year, while the value of those investments fell more than 50%. Both of those annual figures had increased each of the prior five years.

There were plenty of other shifts in the venture market in Q4. Investments worth less than $5 million became more common, while mega-deals fell out of favor. The frequency of bridge rounds boomed. And deal sizes are decreasing at nearly every stage of the startup lifecycle.

Q4 highlights

• Median valuations are trending down at every stage. Seed and Series A valuations ticked down only slightly, but later stages experienced much larger drops—at Series E+, median valuations fell 72% year over year, reaching their lowest point since the 2010s.
• Founders are playing the waiting game. The average wait time in between venture rounds climbed to recent highs in Q4 at several stages. The average interval between a Series A round and a Series B rose to 893 days, or about two years and five months. This means companies need more runway than ever.
• The South is picking up steam. Companies in the region brought home 15.5% of all venture capital funding in the U.S. last year, a notable uptick from 11.7% the year prior. The South was also the fastest-growing region in the U.S. last year in terms of population.

Note: If you’re looking for more industry-specific data, you can also download the addendum to this report to get an extended dataset.

Key trends

Last year’s counts for deal volume and deal value are both down significantly year over year. But it would have been difficult to maintain the frantic pace of activity from 2021, when investment totals rocketed past previous records. On a longer timeline, 2022 actually continued an upward trend: Last year saw more venture deals and more capital invested than any year between 2016 and 2020. However, the number of companies in Carta’s dataset is also higher today than it was five years ago.

Last year’s activity was front-loaded. Venture investors put more than $40 billion to work during the first quarter of the year. By Q4—typically the strongest quarter for venture activity—that figure had fallen below $15 billion. In fact, in terms of both venture deal count and dollars invested, Q4 was the slowest quarter on Carta since 2018.

Deal count has now declined in two consecutive quarters for just the second time in the past seven years; the other occurrence was in Q1 and Q2 of 2020, when the onset of the pandemic sent global markets into turmoil. Then, as now, the primary reason for the slowdown is uncertainty. Investors are still seeking clarity on many of the now-familiar factors that roiled markets last year, including...

Read the rest of this article at carta.com...

Thanks for this article excerpt and its graphics to Kevin Dowd, writer covering the private markets and Peter Walker, Head of Insights at Carta.

Photo by fauxels

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