Equity investors rolled through Q2 uncertainty

Amid a public market slowdown, inflation concerns and tightening monetary environment, the PitchBook-NVCA Venture Monitor Q2 2022 indicates that most investors continued their COVID-era levels of activity through the second quarter of the year. While observed investment deal counts are down, PitchBook has already identified a total investment value of more than $144 billion across angel, seed and VC deals for the first half of 2022 — an amount that would have represented a strong annual total prior to 2021.

This interpretation of the data depends on PitchBook’s estimates of deal activity, which report what the platform believes occurred during the quarter but will only appear in the data once more deals are disclosed. PitchBook typically experiences under-counts in recent quarters due to limited disclosure requirements for private investments.

The differences between the observed and estimated activity are dramatic. Based on observed data (i.e., deals that have been discovered by, or reported to, PitchBook) alone, there were approximately 1,000 fewer deals in Q2 2022 (at 3,374 deals) than in any quarter since the beginning of 2021. But when looking at the estimates, PitchBook expects that Q2 saw a level of deal activity (4,457) in line with the highs seen over the same period.

Because Q1 saw an all-time high for deal activity (4,467 observed and 4,964 estimate), total investment activity appears on pace for a historical high in 2022, with an estimated 9,421 deals through the first half. Seeing another 9,000+ deals close in the second half of 2022 seems unlikely — but so does the fact the market did not slow down more significantly last quarter.

The VentureMonitor indicates slightly more variable experiences during Q2 for different stages of equity investing. When comparing estimated counts, angel and seed stages experienced a decline of 5 percent (approximately 80 deals), but early stage (99 percent) and late stage (103 percent) VC are at or above the level seen in recent quarters.

Based on observed deal activity in different U.S. regions (PitchBook does not ascribe estimates to its regional data), Silicon Valley lost some deal share to the rest of the country — declining from no less than 22 percent in the past 48 quarters to 20 percent in Q2 2022. However, the Los Angeles region picked up deal share from Q1 to Q2 (from 8 percent to 9 percent). In total, the state of California saw 33 percent of all investment deals observed in the U.S. so far in 2022, down from 34 percent in each of the last three years.

Investment into female founders appears to have stagnated through the first half of the year. While teams with only female founders saw an increase of 0.3 percentage points from 2021 to 6.9 percent of deals so far in 2022, investments into coed founding teams fell 1.2 percentage points to 18.2 percent.

VC firms, particularly large ones, appear to have had little trouble raising capital in the first half of the year. The $137 billion raised through Q2 2022 has nearly matched 2021's $142 billion, although this is spread across fewer funds: 470 versus 1,044. PitchBook reports that few funds are expected to seek commitments in the second half of the year, however, so it is unclear how much more these figures will increase (note that this data includes some July activity beyond that reported in the VentureMonitor).