Q3 2023 PitchBook-NVCA Venture Monitor

Q3 2023
In partnership with
The definitive review of the US venture capital ecosystem

PitchBook Data, Inc.
JOHN GABBERT Founder, CEO
NIZAR TARHUNI Vice President, Institutional
Research and Editorial
DYLAN COX, CFA Head of Private Markets
Research
Analysis
KYLE STANFORD, CAIA Lead Analyst, Venture
Capital
MAX NAVAS Analyst, Venture Capital
VINCENT HARRISON Analyst, Venture Capital
KAIDI GAO Associate Analyst, Venture Capital
pbinstitutionalresearch@pitchbook.com
Data
SUSAN HU Senior Data Analyst
Contents Publishing
Report & cover design by Jenna O’Malley,
Chloe Ladwig, and Joey Schaffer
National Venture Capital Association

Executive summary 3 (NVCA)
BOBBY FRANKLIN President & CEO
NVCA policy highlights 4 SHILOH TILLEMANN-DICK Research Director
ROBIN CEPPOS Communications Manager
Overview 6 Contact NVCA
nvca.org
Pre-seed and seed 10 nvca@nvca.org
Early-stage VC 12 Insperity
PAUL J. SARVADI Chairman and CEO
A word from Insperity 14 LARRY SHAFFER Senior Vice President, Marketing
and Business Development
Late-stage VC 16 RANDY FISHER Senior Strategy Manager,
Marketing and Business Development
Venture growth 18 Contact Insperity
insperity.com/capitalgrowth
A word from J.P. Morgan 20 capitalgrowth@insperity.com
Regional spotlight 22 J.P. Morgan Commercial Banking

MELISSA SMITH Co-Head of Innovation Economy
Deals by sector 24 and Head of Specialized Industries
JOHN CHINA Co-Head of Innovation Economy
Female founders 30 PAMELA ALDSWORTH Head of Venture
Capital Coverage
A word from Dentons 32 GINGER CHAMBLESS Head of Research
Contact J.P. Morgan

Nontraditional investors 34 jpmorgan.com/innovationeconomy
Exits 36 Dentons Global Venture Technology

and Emerging Growth Companies Group
A word from Deloitte 38 VICTOR H. BOYAJIAN Global Chair
Fundraising 40 Contact Dentons

dentonsventurebeyond.com
Methodology 43 victor.boyajian@dentons.com
Deloitte & Touche LLP Audit &

Assurance
We have launched a pre-seed report methodology to more accurately and
HEATHER GATES Private Growth Leader
comprehensively capture deals from the earliest phase of venture. Going
forward we will sunset “angel” as a specified stage of venture in all of Contact Deloitte
PitchBook’s venture-focused reports. hgates@deloitte.com
2
PITCHBOOK-NVCA VENTURE MONITOR
Executive summary
The third quarter of 2023 nearly listings by companies like Instacart the current market. However, the
saw the lowest overall venture deal and Klaviyo are of particular interest ecosystem remains well capitalized,
value in six years and the lowest deal for the market as they represent and additional sources of liquidity
count in roughly three. While the mature companies whose ownership from federal programs like the Inflation
headline figures of the quarter are an and investors decided that market Reduction Act and the CHIPS and
important indicator of overall activity, conditions were ideal for liquidating Science Act are becoming available.
without proper context, they can their positions. Current estimates place Finally, sectors like AI and life sciences
obscure—rather than illuminate—the the number of companies waiting to lean into key competencies of the US
story of American venture capital go public at 75, and while exit activity industrial and research bases. Further
(VC) in the back half of 2023. From is expected to be modest in the near investment in research-heavy sectors
generative artificial intelligence (AI) to future, the impending listings of like these could unlock significant
geopolitics, the number of effectively household names like Stripe, Chime, value. The last 18 months have seen
unprecedented factors impacting the and Reddit could portend a more robust a level of tumult in the economy that
market today means that investors liquidity environment. would have been unimaginable just
are still searching for equilibrium in an a few years earlier, but amid stormy
economy that is in flux. In 2022, fundraising was concentrated seas, VC remains well positioned to ride
in the hands of the largest funds, with the waves.
On the front end of the market, the nearly half of all capital committed
relative share of pre-seed to early-stage going to funds over $1 billion. The
deals dropped consistently over the relative share of committed capital to
past year. In comparison, late-stage funds valued between $100 million and
and venture-growth deals have been $1 billion increased sharply over the
on a relatively flat trend over the past year, making up nearly two-thirds of
several quarters. There has also been a funds raised in 2023 so far. Despite the
marked decrease in megadeals over the stronger relative performance of mid-
past year, with deals over $100 million cap funds, 2023 has been a difficult
making up 48.5% of deal value in Q3, a year for emerging managers trying to
far cry from their 60.0% of deal value in raise first funds, with nearly three out of
Q4 2021. Additionally, sectoral trends every four dollars raised in 2023 going
are notable for the relative compression to an established manager and first-
between sectors, with software deals time funds pacing toward their lowest
at a multiyear low in investment share, count in roughly a decade.
while life sciences investment, though
down in absolute terms, is at the highest Overall, the market remains under
relative level since 2020. Whether considerable stress. More companies
investments in life sciences will also are taking bridge, continuation, or down
increase in absolute—rather than rounds; inside rounds are at multiyear
relative—terms remains to be seen. highs; and there are fewer rounds
with a new lead investor obtaining a
The third quarter of the year also saw board seat than at any time in at least
several large liquidity events, which a decade. Investors and founders
were well above trend when compared alike are optimizing for stability and
to the past several quarters. Public cash flow to meet the challenges of
3
NVCA policy highlights
While congressional activity in the third quarter of Small Business Administration final rulemaking 4. Explain: Companies should share how an AI system
2023 was more limited in scope, federal agencies The US Small Business Administration (SBA) released arrived at a particular answer in simple terms
marched forward with a series of consequential two NVCA-supported final rules creating a new so users can better understand why the system
rulemakings impacting the venture ecosystem. Below category of small business investment company (SBIC) produced a particular answer.
is an overview of NVCA’s current policy priorities and license intended to be tailored to equity investment
their state of play. funds. This rulemaking allows new critical technology 5. Innovation: Support US innovation in AI
SBICs to invest or lend private capital and borrow technologies that focuses on unlocking the
FTC and DOJ merger guidelines capital from the SBA to make equity and/or debt potential of AI and maintaining US leadership in
In July, the Federal Trade Commission (FTC) and investments in small businesses and startups. the technology.
Department of Justice (DOJ) laid out new guidelines
for approving mergers. Consistent with other Artificial intelligence developments Additionally, in August, policymakers in the House and
counterproductive FTC activities during Chairperson This summer, Washington set its sights on all things Senate unveiled the CREATE AI Act. The legislation is
Lina Khan’s tenure, NVCA has a number of concerns artificial intelligence. In June, the Biden administration based off the National AI Research Resource (NAIRR),
about the new guidelines, which significantly raise unveiled new efforts regarding AI, which include: which has four primary goals:
the risk of small company acquisitions being blocked
for theoretical reasons that have little underpinning • An updated roadmap to focus federal investments in 1. Spur innovation and advance the development of
in reality and misrepresent nascent firms that fall well AI research & development (R&D). safe, reliable, and trustworthy AI R&D.
short of having monopoly power as being “dominant.” • A request for information (RFI) on critical AI
2. Improve access to AI resources for researchers
We submitted comments to the FTC and DOJ detailing issues from the Office of Science and Technology
and students, including groups typically
our concerns. Policy (OSTP).
underrepresented in STEM.
• A report on the risks and opportunities related to AI
Hart-Scott-Rodino (HSR) proposed overhaul in education. 3. Advance capacity for AI research in the
In late June, the FTC proposed a concerning overhaul United States.
of the Hart-Scott-Rodino premerger notification In late June, Senate Majority Leader Chuck Schumer
rules. If adopted, these rules would dramatically (D-NY) unveiled his long-awaited two-pronged 4. Support the testing, benchmarking, and evaluation
increase costs, burden, and the time required to approach for crafting AI policy, as Congress and the of AI systems developed and deployed in the US.
prepare filings for M&A transactions, even for deals administration race to regulate the booming industry.
that do not raise substantive antitrust issues—and in The SAFE Innovation for AI framework has five California Senate Bill (SB) 54
some circumstances can even hit growth financings. central pillars: Senate Bill 54 quickly advanced through the
NVCA submitted comments detailing how the FTC’s California Legislature this summer and passed in
proposed additional information burden would 1. Security: Shore up national security by examining early September. The bill will require VCs to gather
counterproductively throw sand in the gears of our AI threats from foreign adversaries or rogue diversity data through a survey collected from
nation’s innovation engine. groups and ensure economic security for workers, founders and report information about their funding
especially low-skilled, low-income workers. determinations, including, at an aggregate level,
Outbound Investment Executive Order (EO) specific demographic information for the founding
In August, President Biden issued an Executive 2. Accountability: Support the creation of teams of all the businesses in which the VC fund made
Order instructing the Department of the Treasury “responsible” systems to address issues like an investment during the prior calendar year.
to impose notification requirements—and in some misinformation and bias and support creators by
cases prohibitions—on US investments in Chinese addressing copyright concerns and protecting NVCA has raised concerns about this legislation,
companies that involve semiconductors and intellectual property. including the poor data that will be collected, which
microelectronics, quantum information technologies, will likely dramatically overrepresent the amount
or AI. NVCA submitted comments in response to the EO, 3. Foundations: Require that AI systems align with of diversity in the startup ecosystem and increase
outlining unintended consequences for the US startup democratic values at their core, protect elections, compliance and risk burdens. Governor Gavin Newsom
ecosystem. and promote AI’s societal benefits while avoiding signed the bill on October 8. However, he acknowledged
potential harms. the problematic provisions and will propose cleanup
language as part of his 2024-25 Governor’s budget.
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Overview
Quarterly deal value falls to lowest figure since Q2 2018
US VC deal activity by quarter
$120 6,000
$100 5,000
$80 4,000
$60 3,000
$40 2,000
$20 1,000
$0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2018 2019 2020 2021 2022 2023*

Deal value ($B) Deal count Estimated deal count
PitchBook-NVCA Venture Monitor
*As of September 30, 2023
When we look at deal trends through Deal value pacing for lowest year since 2019
more quantitative measures, it is US VC deal activity
easy to see the shifts the market has
18,926
endured over the past 18 months. While 17,670
quarterly deal counts have stabilized
over the past year, the figures remain 13,593
13,616
considerably lower than those in late 12,506 11,935
11,171 11,863 11,807
2020 through 2021. This slower activity 10,962
10,058
also comes at a time when more than
51,000 VC-backed companies remain
private, increasing the pressure on
startups that are now competing for
investors’ time and capital.
$49.7 $74.0 $86.6 $84.3 $90.3 $147.1 $150.9 $172.9 $347.3 $244.5 $125.9
Deal value declined or was flat quarter
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
over quarter at each stage except for
the late stage, which surpassed its Deal value ($B) Deal count Estimated deal count
Q2 deal value with Anthropic’s $4.0 PitchBook-NVCA Venture Monitor
billion investment from Amazon.
Large deals have become increasingly
uncommon, in part due to the pullback Our VC Dealmaking Indicator consistent in its dearth throughout
from nontraditional investors and to the continues to highlight the investor the year. There is no expectation that
ability of strong companies that are well friendliness of the current market. dealmaking for US VC will shift during
positioned from a cash standpoint to The late stage has distanced itself Q4, and the market should continue
stay out of the market while it is in their from the other stages, as the capital to operate as it currently is. Capital
best interest. supply for its companies has been availability will remain low until an
6
Late stage separates itself as most investor friendly
US VC Dealmaking Indicator by quarter
100
Investor friendly
90
80
70
60
50
Startup friendly
40
30
20
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Early-stage index Late-stage index Venture-growth-stage index
exit market can reappear and pull to determine if the window is truly open growing revenues and, in both cases,
money, and companies, through the for VC-backed companies, these listings achieving profitability. Not only are
venture lifecycle. did illustrate some of the challenges companies that are going public facing
that unicorns face if a listing is their next an uncertain market future, as recession
The big story of Q3 was the IPOs of step. Current multiples are well below fears still exist, but also there will likely
Instacart and Klaviyo. The long drought where many companies raised during need to be a concession on pricing to
of tech-unicorn IPOs was coming to an 2020 and 2021. Both Instacart and make the jump.
end with the hope that more were ready Klaviyo listed at lower share prices than
to get in line. Though it may be too early their previous VC investment despite
Low public multiples damaging IPOs

TTM price-to-sales multiple for VC-Backed IPO Index
25x
20x
15x
13.02x
10x 7.74x 6.30x
4.30x 5.01x
5x
0x
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
2011-2013 median TTM 2014-2016 median TTM 2017-2019 median TTM 2020-2021 median TTM 2022-present median TTM
7
Our VC-Backed IPO Index and DeSPAC assets are receiving a premium, high- get more difficult as interest rates
Index highlight the challenges of an growth VC-backed companies have not are likely to stay elevated for longer,
uncertain market for newly minted been favored. public market multiples remain deeply
public companies. Each index has compressed from their highs, and a
been down by 50% or more since the While our IPO backlog has somewhat potential government shutdown still
slowdown began in early 2022. This plateaued in the past few quarters, the looms over the market.
performance is well under that of large challenges facing VC-backed companies
indexes. In a market where less-risky hoping for an exit remain and may
IPO index remains down 50% since January 2022

US VC IPO Index and DeSPAC Index rebased to 100
120
100
80
60
40
20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
2022 2023*
VC-Backed IPO Index DeSPAC Index
Backlog could set stage for busy market

Monthly VC-backed public listing count versus estimated IPO
100
50
Public listings pulled forward
Public listings in backlog
-50
-100
-150
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*

8
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Pre-seed and seed
Q1 pre-seed and seed activity slumps to a 12-quarter low
US pre-seed and seed deal activity by quarter
$8 2,500
$7
2,000
$6
$5 1,500
$4
$3 1,000
$2
500
$1
$0 0
2018 2019 2020 2021 2022 2023*

In Q3, we launched a new pre-seed Seed deal count on pace to fall below
methodology that encompasses the
pre-pandemic figures
venture market’s evolution at its most
US pre-seed and seed deal activity
nascent stages. Pre-seed startups
$30 7,000
pose an even higher investment risk
than those at seed because they are $25 6,000
often pre-product and pre-revenue. Yet
5,000
these startups present an attractive $20
return profile for investors to deploy 4,000
$15 2,717
capital into. Investors can now leverage 3,000
our newly launched methodology to $10
2,000
more comprehensively, timely, and
$5 455 1,000
accurately evaluate pre-seed investment
opportunities alongside the rest of $0 0
PitchBook’s VC dataset. 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Pre-seed deal value ($B) Seed deal value ($B)

Q3 deal activity in the pre-seed and seed
Pre-seed deal count Seed deal count
stages continued its descent, with just
$3.2 billion invested across an estimated PitchBook-NVCA Venture Monitor
1,214 deals. Both deal value and count
have fallen to pre-pandemic levels in line
with 2018. Despite the popular narrative slowed their pace of investment, which Despite the subdued investment pace,
touting the insulated nature of these allows them to conduct more thorough the median 2023 YTD pre-seed deal size
stages due to their extended time to exit, due diligence and uncover red flags that and pre-money valuation held up against
the selection bar to receive investment is may have previously been overlooked or 2022, at $0.5 million and $5.7 million,
higher than ever. In an investor-favored missed during the scramble to access respectively. The frequent absence of
dealmaking environment, VCs have deals in 2021 and early 2022. quantitative performance metrics for
10
Median pre-seed deal size held at par Median seed deal size remains at record-
since 2021 high level
Range of US pre-seed deal values ($M) Range of US seed deal values ($M)
$1.5 $1.4 $1.4 $6 $5.0 $5.3

$4.9
$1.1 $5 $4.5
$1.1
$1.0 $4
$3.0 $3.0
$3
$0.5 $0.5
$0.5 $2 $1.5
$1.2
$0.2 $0.2 $1
$0.0 $0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
75th percentile Median Average 25th percentile 75th percentile Median Average 25th percentile
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor
*As of September 30, 2023 *As of September 30, 2023
startups at this stage means investor due Seed has similarly escaped the metric interim fund performance and mask
diligence focuses largely on qualitative compression seen in later venture stages. the difficult dealmaking environment
aspects such as the founding team’s Rising deal metrics across pre-seed and awaiting portfolio companies in the early
composition, go-to-market strategy, and seed have created a situation wherein stage and beyond. Consequently, it may
the total addressable market. Often, pre- investors focusing on these stages have be difficult for LPs to discern which VCs
seed startups have yet to validate their evidence to support holding assets at are differentiated enough to thrive and
business idea, thereby creating more risk par value or even prescribing some uplift produce strong returns through this
and potential upside variability. to their startups. For LPs receiving fund downturn, a potential recession, and the
statements, this could suggest positive tail end of their fund life.
Median seed valuations exceed 2022, but First-financing deal value on pace to set a
stagnate at top quartile six-year low, below $15.0 million
Median US pre-seed and seed pre-money valuations ($M) US first-time financing VC deal activity
$12.0 5,684
$12 $11.1 5,225
3,947
$10
3,880 3,849 3,921 3,927
3,487 3,659 3,594
$8
$6.0 2,851
$5.7
$6
$4
$2
$24.0
$24.4
$10.0
$10.0
$10.2
$15.4
$15.6
$15.1
$9.9
$7.5
$8.1
$0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Pre-seed Seed Deal value ($B) Deal count
11
Early-stage VC
Early-stage estimated quarterly deal count remains in line with long-term trend
US early-stage VC deal activity by quarter
$30 2,000
$25
1,500
$20
$15 1,000
$10
500
$5
$0 0
2018 2019 2020 2021 2022 2023*

For 2023 YTD, the early stage has seen Early-stage deal value on pace to set a five-year low
just $30.1 billion invested across an US early-stage VC deal activity
estimated 4,015 deals, with the annual
5,939
deal value on pace to hit a six-year low.
5,573
Raising capital as an early-stage startup
nowadays is especially daunting because
4,462 4,259 4,343 4,431 4,126
the company is tasked with taking its 4,236 3,988 4,015
3,919
refined product and efficiently scaling
revenues—frequently evaluated via
annual recurring revenue (ARR). Amid
the current market volatility, customers’
budgets have tightened, sales cycles
have extended, and converting proofs
$45.0
$30.8
$70.3
$26.2
$26.5
$87.5
$41.6
$30.1
$45.1
$22.1
$17.6
of concept (POCs) or pilots to recurring

revenue has become increasingly
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
difficult. Additionally, many of these
startups continue to combat the Deal value ($B) Deal count Estimated deal count
operational bloat stemming from the PitchBook-NVCA Venture Monitor
growth-at-all-costs mentality of recent
years and look for avenues to extend
cash runway, both of which could
impede revenue targets. Hampered stepping up to a formal Series A or B. As Unsurprisingly, Q3’s deal activity
by the continued mismatch of founder a result, of the $121.9 billion deployed dragged behind prior quarters. Just $8.5
and investor valuation expectations, into VC through Q3, just 24.7% was billion was invested across an estimated
more founders have opted to raise invested in early-stage startups; this is 1,341 deals—the lowest quarterly deal
extension rounds, wherein investor ARR considerably lower than prior decade’s value figure since Q3 2017. Early-stage
expectations are more pliable than when (2013 to 2022’s) annual average of 29.9%. deal metrics sank alongside dealmaking
12
Median deal size is down 26.7% from Median valuation reverts to 2021 figure
2021 record high, but remains above Range of US early-stage VC pre-money valuations ($M)
pre-pandemic figures
Range of US early-stage VC deal values ($M)
$25 $140
$124.0
$20.0 $120
$20 $100.0 $99.8
$16.5 $100
$19.1
$15 $80
$15.8 $85.7
$60 $46.2
$10 $40.0
$6.0 $40
$4.9
$5 $19.8 $20.0
$20
$1.0 $0.9
$0 $0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
through Q3, with the median deal pre-pandemic figures, there is certainly the variance between seed and early-
size landing at $4.9 million, which is room for the median to fall closer to stage valuations shrinks further, value
26.7% below the 2021 record high $25.0 million to $30 million—consistent creation between stages will continue
median of $6.6 million. With inklings with the long-term trend. However, as to erode along with investor interest.
of an improving exit environment, a
cruel optimism has brewed, leading Q3 early-stage capital availability falls back to record
founders returning to market to raise
lows, matching Q1
smaller amounts of capital in hopes
Capital-demand-to-supply ratio in the US early-stage VC marketplace
of conserving equity and a near-term
market rebound in which they can raise 2.0x
at more favorable terms.
1.5x
Yet questions remain: Have we hit the
bottom? If not, how much longer until
we do, and how far do we have to fall? 1.0x
Contrary to prevailing seed valuations,
the median year-to-date early-stage
pre-money valuation came in at $40.0 0.5x
million—a decrease of 13.4% from the
2022 median of $46.2 million, but back
0.0x
in line with the 2021 median. While
the early-stage median stands above Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2018 2019 2020 2021 2022 2023*
13
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• What can you do for my portcos on Is there a business on their list similar to
If you’re getting low introductory pricing, the recruiting front? Do you help with your size and needs?
asking this question can help you avoid hiring C-suite talent for rapid growth?
surprise PEO cost increases later. • How does your HR technology You can ask them questions about their
infrastructure support rapid growth? experience with the PEO and the impact
4. Tell us about your EPLI coverage • How will you help us build a culture it’s had on their business and employees.
by design? Can you describe previous
The goal in asking this question is work with diversity, equity & inclusion You may also find case studies or video
to find out: (DEI) programs and employee testimonials on a PEO’s website and
culture surveys? independent client reviews published
• If the PEO carries employment elsewhere online. Just be sure to read
practices liability insurance (EPLI). 6. Can we meet the people who will be online reviews critically—and even
• What coverage your company would servicing our account? consider contacting the author for more
gain by joining this PEO. information—if you’re going to make a
Some PEOs are strictly web-based. choice based on what they say.
This is important because EPLI can Some charge extra to speak with a live
help protect small businesses from representative, while others use call At Insperity, we can answer each of
the financial consequences associated centers. In these cases, you may speak these questions with confidence.
with a variety of employment-related with a different person each time you We have a long history of helping
lawsuits, such as wrongful termination or need help. businesses of any size or sector reach
noncompliance with the Americans with their goals. It’s proven that having a
Disabilities Act. Other providers offer fully staffed PEO working alongside a company that
offices around the country. These PEO desires to grow quickly is the best way
Many PEOs provide EPLI coverage that companies typically provide more to accelerate that growth and sidestep
you may otherwise not have considered. person-to-person service and support. the many potential pitfalls that come
Knowing how much coverage you’re And if you join one with a nearby office, with success.
gaining (if any) can help you compare you may have opportunities to meet the
the level of risk management that you PEO’s service team in-person. For more on bringing the benefits of a
would get with one PEO versus another. PEO to your VC firm and your partners,
It’s important to find a PEO that offers contact Randy Fisher, Insperity’s Private
5. How will you take care of our the appropriate level of support to suit Capital Development Director, at
portfolio companies? your business’ HR needs, so ask to meet randy.fisher@insperity.com.
the people who will be serving you.
It’s important to make sure the PEO Insperity has helped thousands of startups
you’re considering has experience You can also ask the PEOs you’re by providing the HR infrastructure they
working with venture capital firms and considering for their “staff support ratio,” need to gain the competitive advantage
for talent and support their growth.
their portfolio companies. or the number of the PEO’s service team
Insperity believes startups are critical to
members to the total number of their
the vitality of the American economy, and
A good PEO will be able to support client companies’ employees. This can
we’re eager to work alongside up-and-
fast-growing companies at any stage of be a good metric to compare the level coming companies that share that belief.
15
Late-stage VC
Q3 deal value and count continued to descend
US late-stage VC deal activity by quarter
$50 1,600
1,400
$40
1,200
$30 1,000
800
$20 600
400
$10
200
$0 0
2018 2019 2020 2021 2022 2023*
Q3 would have been a continuation

Annualized deal value on par with pre-pandemic level
of the descent in deal value had it not
US late-stage VC deal activity
been for Anthropic’s $4 billion deal with
Amazon, though a single deal does not 5,009
4,720
indicate a return to capital availability
for the market. Consistent with H1, a 3,608
flight to quality among investors has 3,499 3,285
led to a dealmaking slowdown across 2,980
2,477 2,629
the venture lifecycle. According to the 2,277 2,421
PitchBook VC Dealmaking Indicator, 1,991
investor friendliness at the late stage has
risen to the highest level in our dataset,
$19.0
attesting to severe challenges that

$152.6
$70.6
$94.6
$65.6
$30.3
$32.5
$59.7
$57.3
$30.1
$30.1
mature startups have encountered with

equity financing.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Many GPs have pushed off their next Deal value ($B) Deal count Estimated deal count
fundraise until at least 2024. This PitchBook-NVCA Venture Monitor
delayed timeline has led to a slowed *As of September 30, 2023
pace of capital deployment. In the

circumstance wherein GPs write a large VC, wherein mature startups that have megadeals, while the same quarter one
check to a startup, the selection bar has not yet reached cash flow breakeven year ago recorded 43. A lack of outsized
risen, both as a de-risking mechanism typically need significant cash infusion rounds attests to the equity financing
and to ensure their investment decisions for business expansion. The number of headwinds that late-stage startups face,
are justifiable from an LP lens. This megadeals ($100 million+) at the late many of which have opted for increasing
capital shortage phenomenon is stage remained low during the past few business efficiency via cost-cutting
particularly acute in the later stages of quarters. Q3 observed 30 late-stage measures such as layoffs.
16
YTD median deal size falling to 2019 level YTD median valuation falls below
Range of US late-stage VC deal values ($M) 2022 full-year figure
Range of US late-stage VC pre-money valuations ($M)
$40 $400
$25.4 $263.8
$30 $300
$24.7
$210.4
$25.0 $175.1
$20 $17.0 $200
$130.3
$8.6
$10 $100 $52.2
$5.8 $61.1 $24.0
$2.0 $25.0
$1.2
$0 $0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
According to PitchBook’s Q3 2023 by raising outsized rounds during the raised at elevated valuation levels will
Quantitative Perspectives, the 2022 frothy times of 2021 and early 2022, and need to return to the market. Should
to 2023 YTD price-to-sales (P/S) have subsequently delayed their next the lackluster dealmaking momentum
multiple for the VC-backed IPO Index fundraises; however, reducing cash burn continue, more late-stage startups will
sits at 5.0x—a sharp decline from cannot sustain a business indefinitely. likely seek creative ways of financing,
the 2020 to 2021 median of 13.0x. Toward the end of 2023 or early 2024, risk taking a down round, or, for the
Compressed public market multiples some of these startups that previously underperforming ones, potentially fold.
have made it more difficult for late-
stage companies to go through a public Late-stage capital demand sitting at 2.7x available
listing. Anecdotally, more late-stage
supply
startups are exploring acquisition
Capital-demand-to-supply ratio in the US late-stage VC marketplace
opportunities as a potential alternative
means of exiting, as the IPO market 3.0x
has yet to meaningfully show signs of
2.5x
restored vitality.
2.0x
Historically, high-quality companies
with a strong talent base and a 1.5x
competitive edge have found success
1.0x
fundraising irrespective of the macro
climate. The same holds true for the
0.5x
current environment. On the other
hand, mediocre companies that are 0.0x
unable to hit milestones or demonstrate Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
progression toward a path to profitability 2018 2019 2020 2021 2022 2023*
will encounter major hurdles for future
financing events. Many late-stage PitchBook-NVCA Venture Monitor
startups loaded up their balance sheets *As of September 30, 2023
17
Venture growth
Venture-growth deal count witnesses notable decline in Q3
US venture-growth deal activity by quarter
$30 300
$25 250
$20 200
$15 150
$10 100
$5 50
$0 0
2018 2019 2020 2021 2022 2023*

Through the third quarter of 2023, $27.3 billion invested in venture-growth deals
venture-growth-stage startups have
through 2023
encountered several challenges, marked
US venture-growth deal activity
by a dearth of exit activities and a
pronounced downturn in valuations. 954
In Q3, this stage recorded $6.6 billion in 832

745
total deal value—roughly flat compared 681
628
to Q2 and a 53.0% decline from Q1. 599
547 534
Arguably more noteworthy was the 494 513 490
substantial decline in the number of
venture-growth deals in Q3, with an
estimated 175 completed deals—down
$9.6
from 228 in Q2—representing the $27.3

$88.5
$45.7
$29.8
$55.4
$24.4
$35.9
$22.1
$19.9
$17.3
lowest quarterly deal count in nearly 14

quarters. As our data reveals, not only
are there fewer venture-growth deals 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
being completed, but smaller checks Deal value ($B) Deal count Estimated deal count
are being written as well. Thus far into PitchBook-NVCA Venture Monitor
the year, the median annual deal size *As of September 30, 2023
for venture-growth startups sits at $11.4

billion, which is nearly one-third of the availability and a discernible shift in million—a five-year low and a 52.8%
$31.0 billion median observed in 2021 and investor sentiment. This shift is further drop from 2022. In the current high-
the lowest median deal size since 2016. evidenced by a continued decline in interest-rate environment, investor
valuations; the median pre-money sentiment continues to shift toward
The convergence of fewer, smaller deal valuation for venture-growth-stage prioritizing profitability and robust
sizes illustrates both reduced capital startups in 2023 stands at $129.8 financial metrics over a relentless
18
2023 YTD median deal size falls to seven- 2023 YTD median pre-money valuation
year low less than half of 2022 figure
Range of venture-growth deal values ($M) Range of venture-growth pre-money valuations ($M)
$120 $2,500
$78.1
$100 $2,065.6
$2,000
$80
$77.6 $1,500 $1,457.2
$57.3
$60
$1,100.0
$37.9 $1,000
$40
$20.0
$11.4
$500 $275.0 $439.6
$20 $2.7
$4.4 $129.8
$76.0
$0 $0 $53.2
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
pursuit of growth at all costs among Looking forward, the future of many Cash runways can only last so long, and
venture-growth-stage startups. As venture-growth startups hangs in staying private is a privilege. Assuming
the prevailing risk-reward dynamic limbo. Many startups that raised the lackluster exit environment and
continues to favor alternative financing rounds at the height of 2021 current trends persist, we are likely to
investment instruments, investors are now find themselves trapped in a much see a large wave of down rounds and
increasingly recognizing the value in harsher fundraising environment when shutdowns in coming quarters.
startups that can demonstrate a clear subsequently seeking follow-on rounds.
path to profitability and a focus on
long-term financial health to mitigate
Demand-supply ratio increases to 2.2x, its highest level in
failure risk.
over a decade
Capital-demand-to-supply ratio in the US venture-growth marketplace
Beyond a growing preference for
profitability, which many startups 2.5x
are unable to demonstrate, the
lack of exit opportunities for these 2.0x
mature enterprises has restricted
the return potential for existing and 1.5x
potential investors, leading many to
slow their pace of new and follow-on
1.0x
commitments. This has subsequently
led to a disparity between the amount of
0.5x
capital being demanded by startups and
the amount of capital able to be supplied
by investors. PitchBook’s Dealmaking 0.0x
Indicator reveals a capital-demand-to- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
supply ratio of 2.2x for venture-growth- 2018 2019 2020 2021 2022 2023*
stage startups as of Q3, the highest ratio PitchBook-NVCA Venture Monitor
within our dataset. *As of September 30, 2023
19
Sponsored by
A WORD FROM J.P. MORGAN

Our views on venture
“While there are a few pockets of is ongoing at around $1 trillion per year,
optimism within venture, the dust has not effectively removing that amount of Ginger
totally settled for much of the ecosystem. liquidity from the economy. Chambless
Head of Research,
Given the more discerning environment,
Commercial Banking
many startups that were backed in The effects of higher interest rates and
Ginger Chambless
2021 are unlikely to get the same warm tighter credit are still playing out. While
is a Managing
reception when they next need to raise. the volatile conditions of March have
Director and Head
Of course, it is encouraging to see the faded, regional banks are slowing loan
of Research for
green shoots, but a little premature to growth, which will subdue economic
JPMorgan Chase Commercial Banking. In
say we are through the worst of it.” activity in certain sectors over the this role, she produces curated thought
—John China, Co-Head of Innovation coming quarters. Plus, consumers’ leadership content for commercial
Economy, Commercial Banking dwindling excess savings and the banking clients and internal teams.
resumption of student loan payments Her content focuses on economic and
The US economy has performed are headwinds to spending. market insights, industry trends, and the
better than expected in 2023, but capital markets.
risks are elevated heading into 2024 The outlook is also clouded by a
greater-than-normal degree of Additional contributors:
Macroeconomic conditions have Pamela Aldsworth
unpredictability around global trade,
developed more favorably than we Head of Venture Capital Coverage
commodities markets, and national
thought three to six months ago.
security stemming from the ongoing Andy Kelly
Resilient consumer spending, stabilizing Managing Director, Venture Capital Coverage
Russia-Ukraine war and US-China
business sentiment, and ongoing fiscal
trade tensions.
support have all contributed. Recession
forecasts have been pushed out, and portfolio companies in the pipeline.
Given elevated uncertainties around the
inflation continues to moderate while Aside from the general pick-up in
macro economy and financial markets,
labor markets remain tight. Within the volumes, there will be a lot of focus
it remains crucial for founders to plan
venture ecosystem, we have seen labor on pricing outcomes and subsequent
ahead and be ready to raise capital
markets settle after turbulence earlier trading performance for this cohort, as
when a window of opportunity presents
this year. Although the technology well as the ability to deliver on earnings
itself. If a company’s cash runway is
sector leads all industries in layoffs expectations out of the gate. If all
within 18 to 24 months, the time to start
over the past nine months, the pace of goes well, and the broader macro and
thinking about a private raise is now.
monthly job cuts has declined nearly markets backdrop remains supportive,
While it might be tempting for founders
90% from the spring. we expect a bigger reopening in 2024.
to wait for a better deal down the road,
taking decisive action sooner is often
Looking ahead, economic and financial Even though the window may open
the better path.
market risks are elevated given the wider in 2024, we expect the bar
significant amount of monetary to remain high. Investors are likely
With the recent uptick in IPO activity,
tightening that has occurred over the to maintain discipline around IPO
there are glimmers of optimism for
past 18 months. Even if the Federal participation, focusing on high-quality,
venture markets
Reserve is done hiking rates this cycle, profitable companies with proven
we do not expect to see rate cuts until Although a broader reopening of IPO business models and reasonable
the latter part of 2024. Meanwhile, the markets could still be months away, valuations. Historically speaking, a
Fed’s balance sheet runoff program— recent activity is encouraging if you vibrant IPO market has seen 90 to 100
also known as quantitative tightening— are a late-stage company or VC with venture-backed listings in a year.
20
Sponsored by
It is hard to say whether we will see Following a steep drop from Q2 2022 to decisions about how much capital to
those numbers in the next year or Q4 2022, valuation caps appear to be raise and at what valuation and terms.
if listings will build more gradually. stabilizing in line with historical ranges. Access to investor networks such as
Regardless, with the IPO backlog sitting those we have available through J.P.
at unprecedented levels, there could be Startups are looking to banking Morgan’s Capital Connect platform
a competitive rush for the exits. partners for treasury management, can create opportunities for capital
venture lending, and networks raising, while introductions to much
In the meantime, my colleague Carly larger companies that could become
According to Ashraf Hebela, Head
Roddy, Head of West Coast Private customers or offer operating expertise
of Startup Banking, it seems as if
Capital Markets, notes that we have can provide a competitive edge.
founders have spent more time on
seen active markets for secondary
treasury and cash management best
transactions and priced equity rounds © 2023 JPMorgan Chase & Co. All rights reserved.
practices in the six months following
for late-stage companies. On the back JPMorgan Chase Bank, N.A. Member FDIC.
Silicon Valley Bank’s collapse than in
of green shoots in the IPO markets, Visit jpmorgan.com/cb-disclaimer for full
the prior 10 years combined. While
there is an increased dialogue for disclosures and disclaimers related to this content.
decisive actions taken by the Fed,
issuers going to market with pre-
Treasury, and FDIC have tempered the
IPO capital raises, which can serve
pace of deposit flight in recent months,
as a branding event ahead of an IPO,
the lens through which startups and
to transition the cap table to long-
VCs evaluate banking partners may
term holders and provide liquidity
have permanently shifted. Access
to shareholders and employees. The
to and safety of funds are no longer
market tone has improved, supporting
taken for granted, while earning a
more opportunistic issuances by
competitive yield on excess cash and
companies as opposed to the “need
a simplified onboarding experience
to raise” mentality that has prevailed
remain important. More consideration
over the past 18 months. Crossover and
is being given to longer-term treasury
public-style investors are beginning
management because as a company
to return to the private markets, while
grows and scales, treasury needs
growth equity and private equity
become more complex.
investors remain engaged, with record
dry powder to put to work.
Venture lending is another area in
which startups and VCs are seeking
Some early-stage companies still see
clarity given the shifting lender
the convertible note as a helpful tool
landscape. While activity in venture
to bridge to the next financing round.
lending has slowed due to subdued
According to Aumni, a J.P. Morgan
venture activity overall, the top end of
company that pulls anonymized data
the market is starting to pick up.
from tens of thousands of closing
documents to provide market insights,
Startups are increasingly looking to
valuation caps have trended up
their banking partners for insights
recently. A higher valuation cap is
and networks. It is important for
generally considered more favorable
founders to leverage data analytics and
to founders because when the note
sector insights to navigate dynamic
converts into equity, there is less
market conditions and make informed
dilution to existing shareholders.
21
Regional spotlight Deal value remains
concentrated in major hubs
Share of VC deal value by market
Proportion of deal counts is
nearly equal
Share of VC deal count by market
breakout* breakout*
Bay Area deal activity witnesses continued slowdown
Q3 VC deal activity by ecosystem*
Venture growth 67.7% 32.3% Venture growth 50.0% 50.0%

Seattle
Q3 2023 deal count: 79
Q3 2023 deal value: $1.0B
Boston
Late stage 70.9% 29.1% Late stage 46.6% 53.4%
Philadelphia
Q3 2023 deal value: $0.8B New York
Bay Area
Q3 2023 deal count: 515 Denver
Q3 2023 deal value: $12.7B Q3 2023 deal count: 67
Q3 2023 deal value: $0.8B Washington, DC
Q3 2023 deal count: 100 Early stage 65.5% 34.5% Early stage 51.3% 48.7%
Los Angeles
Austin
Pre-seed/seed 60.1% 39.9% Pre-seed/seed 49.6% 50.4%
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
Miami Bay Area, NY, LA, Boston Outside hub markets Bay Area, NY, LA, Boston Outside hub markets
Q3 2023 deal count: 71 PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor
Q3 2023 deal value: $0.4B PitchBook-NVCA Venture Monitor *As of September 30, 2023 *As of September 30, 2023
Los Angeles Boston Austin

Los Angeles has seen its deal count activity slip back Boston still securely sits as the fourth-most-active Austin will likely reach 400 completed deals for the
toward 2020 levels, pacing for the largest drop YoY in market. However, the difference between Boston third consecutive year in 2023. That figure would be
deal count among the top 10 markets. This has a lot to and the next-most-active ecosystem, Philadelphia, just a 20% decline from the 2021 high, making Austin
do with the growth that the market realized through the is considerably smaller than it was a few years ago. one of the more resolute VC ecosystems of the major
height of VC—a 41.1% YoY increase from 2020 to 2021. Boston still commands high prices and has seen strong markets. Fundraising for Austin-based firms has been
fundraising over the past few years, bolstering it as a slow, with just nine funds closing in 2023; 35 or more
desirable market for VC. closed during each of the past two years.
22
Innovation.
Acceleration.
Disruption.
Dentons Global Venture Technology
a boutique on a global
law firm platform
VentureBeyond.
dentonsventurebeyond.com
© 2023 Dentons. Dentons is a global legal practice providing client services worldwide
through its member firms and affiliates. Please see dentons.com for Legal Notices.
DEALS BY SECTOR
Enterprise SaaS
2023 deal value approaching 2022 levels, Late stage continuing to grow YoY, early
while deal count lags stage and pre-seed fall in proportion
US enterprise SaaS VC deal activity Share of US enterprise SaaS VC deal count by stage
2,480 100% Venture growth
90% Late-stage VC
2,145
80%
Early-stage VC
1,675 70%
1,636
Pre-seed/seed
1,384 60%
1,107
50%
40%
30%
$60.4
$20.0
$34.3
$43.5
$81.0
$31.3
20%
10%
2018 2019 2020 2021 2022 2023* 0%
Deal value ($B) Deal count 2018 2019 2020 2021 2022 2023*
Average increase buoyed by singular 2023 figures nearly match 2021 records
megadeals, while median decreases Median and average US enterprise SaaS VC pre-money
Median and average US enterprise SaaS VC deal values ($M) valuations ($M)
$50 $400
$42.9 $342.7
$350 $287.7
$40
$300
$29.1
$30 $250
$200
$20
$12.7 $150
$10.5
$100
$10 $55.0 $45.0
$50
$0 $0
2018 2019 2020 2021 2022 2023* 2018 2019 2020 2021 2022 2023*
Median Average Median Average
24
AP supported by megadeals, followed by traditional leaders ERP and CRM
Q3 2023 US enterprise SaaS VC deal activity by segment*
96
50 57
25 25
12
$209.2
$374.6 $504.2
$4,797.6 $944.0 $2,736.3
Analytic Customer Enterprise Supply chain Knowledge Other application

platforms (AP) relationship resource management (SCM) management software (OAS)
management (CRM) planning (ERP) systems (KMS)
Deal value ($M) Deal count
Other application software deal value lifted by OpenAI megadeal in Q1 2023

TTM US enterprise SaaS VC deal activity by segment*
593
344
232
150
99 117
$8,200.0 $5,951.7 $20,926.9 $2,404.6 $2,311.5 $14,437.5
Analytic Customer Enterprise Supply chain Knowledge Other application

platforms (AP) relationship resource management (SCM) management software (OAS)
management (CRM) planning (ERP) systems (KMS)
25
ERP deal value shows continued resilience, while CRM has fallen precipitously YTD
US enterprise SaaS VC deal value ($M) by segment
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2018 2019 2020 2021 2022 2023*
Analytic platforms (AP) Customer relationship management (CRM) Enterprise resource planning (ERP)
Supply chain management (SCM) Knowledge management systems (KMS) Other application software (OAS)
Deal count smooths out megadeals, revealing continued focus in ERP, CRM, and AP
US enterprise SaaS VC deal count by segment
1,000
800
600
400
200
0
2018 2019 2020 2021 2022 2023*
Analytic platforms (AP) Customer relationship management (CRM) Enterprise resource planning (ERM)
Supply chain management (SCM) Knowledge management systems (KMS) Other application software (OAS)
26
DEALS BY SECTOR
Mobility tech
Deal value and count remain well below Venture growth and late-stage VC
levels of recent years continue taking larger share of deals
US mobility tech VC deal activity Share of US mobility tech VC deals count by stage
567 100% Venture growth

523 521 504
472 90% Late-stage VC
414 80% Early-stage VC
70% Pre-seed/seed
60%
208 50%
40%
30%
20%
$7.6 $19.8 $18.4 $19.1 $31.4 $15.5 $6.5
10%
2017 2018 2019 2020 2021 2022 2023* 0%
Deal value ($B) Deal count 2017 2018 2019 2020 2021 2022 2023*
Average and median deal values remain Average remains flat, while median slips
muted Median and average US mobility tech VC pre-money
Median and average US mobility tech VC deal values ($M) valuations ($M)
$70 $800
$60 $700
$50 $44.9 $600

$39.6 $500
$40 $344.6
$400 $360.0
$30
$300
$20
$12.2 $10.2 $200
$10 $90.0 $60.0
$100
$0 $0
2017 2018 2019 2020 2021 2022 2023* 2017 2018 2019 2020 2021 2022 2023*
Median Average Median Average

27
Investment in electric vehicle (EV) segment continues to dominate in Q3
Q3 2023 US mobility tech VC deal activity by segment*
9 8
8
4
3 3
2 1 1
0 0 $46.8
$0.1
$360.3 $0.0 $111.7 $530.3 $1,838.1 $24.2 $15.0 $54.9 $0.0
Micromobility
Auto
commerce
Aerospace
Last-mile
delivery
Public
mobility
solutions
Autonomous
driving
Freight
Marine
Electric
vehicles
Fleet
management &
connectivity
Advanced
air mobility

Investment in EV segment garners lion’s share of value for TTM

TTM mobility tech VC deal activity by segment*
42
35
33
25
17 19
12 6 12
9
0 1 $298.4 0
$395.5 $302.5 $7.2 $194.9 $415.4
$0.0 $163.2 $0.0
$1,326.9 $541.9 $1,329.8 $3,721.3
Electric
vehicles
Fleet
Last-mile
delivery
Marine
Micromobility
Public
mobility
solutions
Advanced
air mobility
Aerospace
Auto
commerce
Autonomous
driving
management &
connectivity
Freight
Ridehailing
Deal value ($M) Deal count Smart transit

28
EV deal value dominates in 2023 as autonomous driving, freight, and last-mile fall off
US mobility tech VC deal value ($M) by segment
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2018 2019 2020 2021 2022 2023*
Advanced air mobility Aerospace Auto commerce Autonomous driving Electric vehicles Fleet management & connectivity Freight
Last-mile delivery Marine Micromobility Public mobility solutions Ridehailing

Deal count for 2023 more broadly distributed across sectors, with EVs leading
US mobility tech VC deal count by segment
100
80
60
40
20
0
2018 2019 2020 2021 2022 2023*
Advanced air mobility Aerospace Auto commerce Autonomous driving Electric vehicles Fleet management & connectivity Freight
Last-mile delivery Marine Micromobility Public mobility solutions Ridehailing

29
Female founders
Investment in female founders struggles to All-female-founded companies finding
keep pace with 2022 difficult market
US VC deal activity in companies with at least one US VC deal activity in companies with all-female
female founder founding teams
4,928 1,192
4,406 1,109
3,408
3,355 811
2,936 2,385 735
2,621 649 646
2,329 2,259 561
2,138 491
480 473
1,715 403
$7.0
$44.4
$20.8
$26.2
$25.7
$35.3
$16.2
$10.1
$11.2
$12.1
$61.1
$2.0
$3.8
$2.4
$3.2
$3.5
$2.3
$7.6
$1.4
$1.4
$1.7
$5.1
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Deal value ($B) Deal count Deal value ($B) Deal count
Proportions of total deal count falling Large deals biasing the positive jump
Female-founded company deal count as share of all US VC Female-founded company deal value as share of all US VC
deal count deal value
30% 30% 28.1%

25.2%
24.0%
25% 25%
20% 20% 18.2%
15% 15%
10% 10%
6.3% 6.5%
5% 5%
2.1% 1.9%
0% 0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
All female founders At least one female founder All female founders At least one female founder
30
First-financings cannot keep momentum Larger proportion of female-founded
Share of US VC first-time financings by founder gender companies reaching late stage
Share of US VC deal count for female-founded companies
by stage
100% 100%
All male Venture growth
90% founders
Late-stage VC
80% Mix 80%
Early-stage VC
70% All female
60% founders 60% Pre-seed/seed
50%
40% 40%
30%
20% 20%
10%
0% 0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*

Late-stage deal value already New York distancing itself from Bay Area
surpasses 2022 Top five US CSAs by deal count for companies with all-female
Share of US VC deal value for female-founded companies founder teams in 2023*
by stage
Combined statistical area Deal count
100% Venture growth New York 156
Late-stage VC
80% San Jose 97
Early-stage VC
Los Angeles 55
60% Pre-seed/seed
Boston 28
Washington, DC 26
40%
20%
0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*

31
Sponsored by
A WORD FROM DENTONS GLOBAL VENTURE TECHNOLOGY GROUP

Federal funding: Pathways for growth
Victor H. Boyajian, Global Jeff Denham (Washington, DC):
Victor H. Boyajian
There are three really major bills that
Chair of Dentons Global have passed in recent years, and they Global Chair, Dentons
Venture Technology are the Infrastructure Investment Global Venture
and Jobs Act, the CHIPS and Science Technology and
and Emerging Growth Emerging Growth
Act, and the Inflation Reduction Act.
Companies Group, sat Embedded within all those bills are Companies Group
down with colleagues programs for grant opportunities, Victor leads a global
especially in the energy, transportation, team focused on representing emerging growth
representing Dentons and infrastructure sectors, as well as technology companies, venture capital firms,
Public Policy and Venture technology in terms of the development corporate strategics, and private equity firms in a
broad array of financings and strategic transactions
Technology leadership to of chips here in the United States.
from Silicon Valley to Boston and New York, and
discuss federal funding Jacobs (Washington, DC): In order to
around the globe.
opportunities for emerging assist our clients, Dentons’ Public Policy Christina Austria
team has developed a grant-monitoring Counsel, Dentons
growth companies. system that pulls together all open Global Venture
grant opportunities and is tailored to Technology and
Victor H. Boyajian (New York/ Emerging Growth
our clients’ needs and eligibility. From
San Francisco): In the current Companies Group
this customized report, we can then
macroeconomic economic environment
help to identify the best opportunities, Christina routinely
where venture capital financings are
strategize on potential partnerships, serves as outside general counsel to clients. She has
down some 25%, it is important for
and help get congressional support for significant experience in structuring, negotiating,
emerging growth companies to consider
these applications. and advising clients on a wide variety of venture
ways to tap into the large amount of financing and M&A transactions.
federal stimulus funding opportunities.
Boyajian (New York/San Francisco): Matthew Cutts
It can be a low-risk way to enhance
This is a very unique service offering. Head of US Policy and
balance sheet management and allow
Why is this an attractive option for Government Relations
a company to continue to aggressively
emerging growth companies, especially
execute upon its strategic growth plan. Matthew Cutts is the
in our current funding environment?
head of US Policy and
Emily Jacobs (Washington, DC): It is a Government Relations.
Christina Austria (Washington, DC): He coordinates large
common misconception among clients
When our clients think about venture multilayered public policy initiatives and helps
that federal funding is meant only for
funding, we expect the venture firm his clients achieve their most sought-after federal
public or nonprofit entities. This is not
to take an equity ownership stake legislative objectives.
the case. Numerous bills have passed
and usually also a governance stake.
in recent years that have created
Depending on the stage of your
many new opportunities for private Joe Crowley is a Senior Policy Director and
company, you might not be ready for this
entities in a variety of areas, including former US Representative from New York’s 14th
step—especially in our current market,
healthtech, climate tech, energy, Congressional District.
which favors investors’ interests. The
defense, aerospace, sustainability, and
advantage to federal funding is that the
infrastructure. In the fiscal year 2022, Jeff Denham is a Senior Policy Director and
government won’t take a stake in your former US Representative from California’s 10th
the US government gave out more than
company, so this is a form of nondilutive Congressional District.
$750 billion in federal grants through
capital that is an especially compelling
various agencies. Emily Jacobs is a Partner in Dentons’ Public
option for early-stage companies. It is
more than just the money. Policy Group.
32
Sponsored by
Joe Crowley (Washington, DC): These Jacobs (Washington, DC): It really Cutts (Washington, DC): What key
are competitive grants, and when depends on the grant guidelines. There sectors do you think are especially
you receive the grant, it can even may be a grant specific to one project important right now among venture
serve as a seal of approval for future in an exact location or a grant with capital investors?
venture funding. less direction, where there is a general
incentivization to create a new product, Boyajian (New York/San Francisco):
Boyajian (New York/San Francisco): for example. We’re seeing attention turn to climate
That is a critical point. Having tech, fintech and digital health, as
a successful grant can serve to Boyajian (New York/San Francisco): well as AI and cybersecurity. It’s
help reaffirm your position in the Are there situations where we can see exciting to see that there are federal
marketplace and expand your business, whether new grants can be created? grant opportunities for these exact
ultimately attracting your next round of What would this process look like? categories. Our group is, in turn,
private financing. focusing on these exact industries to
Cutts (Washington, DC): Yes, if a client help accelerate strategic growth.
Matthew Cutts (Washington, DC): Can is looking into opportunities at the
you share with us some of the early Department of Energy, for example, Dentons Venture Technology team ranks in
questions companies should be asking but the perfect opportunity doesn’t PitchBook’s top 10 for global venture and
themselves as they’re looking at the exist, we can sometimes leverage M&A deals.
multitude of opportunities? connections and connect with the
relevant member of Congress to ask:
Jacobs (Washington, DC): The main Have you ever thought about funding
thing you need to do is understand the this type of project? Are there any plans
process. These grants are put out on to create new grants?
a continual basis, so you should have
those conversations early on with the Austria (Washington, DC): It’s really
agency to know what’s coming in the unique that you’re not just helping
pipeline. You must make sure it’s a companies apply for grants that are
mission match for you and what you’re already specified, but because we know
trying to accomplish, because once these agencies and the possibilities, we
these are posted, it’s a relatively quick can actually bring our client needs to
turnaround to get these applications in them to ask the reverse: What can you
before the deadline. From there it will provide to match this?
go to the review process, and that can
take a few months, so understand that Boyajian (New York/San Francisco): A
it’s not a quick cash infusion, it’s a long- consideration companies might have is:
term play. What do we have to give up in exchange
for this funding? We might not want
Crowley (Washington, DC): In my time to have our core asset, our intellectual
in office, I have never seen this amount property, in any way restricted or
of funding out there. You just have to owned by another constituent, such as
be creative and understand how you fit the federal government. Is that concern
into the different boxes the government ill-founded or valid?
has to be able to access those grants.
Denham (Washington, DC): I can’t
Boyajian (New York/San Francisco): think of any scenarios with such strings
Is the grant opportunity tied to attached. But I think that’s part of our
a specific project, or can it just diligence process. We sit down and
go to generally support working look through the long litany of possible
capital? I think that’s a really grants and narrow that down to what
important distinction. really fits the need.
33
Nontraditional investors
Nontraditional investor deployment to VC falls to five-year low
US VC deal activity with nontraditional investor participation by quarter
$90 2,000
$80
$70 1,500
$60
$50
1,000
$40
$30
$20 500
$10
$0 0
2018 2019 2020 2021 2022 2023*

In Q3, total deal value involving 2023 YTD deal value participation on pace to finish below
nontraditional investors amounted to
$110.0 billion annually
$26.2 billion, accounting for 71.4% of
US VC deal activity with nontraditional investor participation
the total deal value in the US VC market
during the period. With the exception of
7,331
Q1, the proportion of deal value involving 6,416
nontraditional investors to overall VC
deal value has been steadily declining, 4,745
and Q3’s proportion is the among the 4,486
lowest in recent years. The repercussions 4,080
3,512 3,712
of nontraditional investor withdrawal 3,064 3,282 3,192
2,529
are quickly observed in private markets,
$48.8
constraining the capital availability across

$27.6
all venture stages—particularly for late-

$280.9
$185.0
$134.8
$112.4
$60.8
$60.5
$111.9
$92.2
$59.8
and venture-growth-stage startups that

demand larger amounts of capital relative
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
to earlier-stage enterprises. Consequently,
these startups may be compelled to court Deal value ($B) Deal count Estimated deal count
new equity investors at flat or reduced
valuations or explore costly nondilutive
financing options such as venture
debt, accessible only to the highest- However, the subdued exit environment superior yield-to-risk ratio compared to
quality enterprises. since 2022 has hindered startups’ private investments such as VC. Crossover
ability to generate returns for investors. investors in particular have continued
Historically, the allure of VC investment Moreover, escalating interest rates to pull away from the VC ecosystem,
for nontraditional investors rested upon have rendered alternative investments tallying just $10.9 billion in deal value in Q3
its potential for outsized financial returns. like bonds more attractive, given their compared to $11.5 billion in Q2; on a deal
34
NTIs participate in just 249 venture- Crossover participation deal count
growth deals through 2023 YTD declines significantly in Q3
US VC deal activity with nontraditional investor participation US VC deal activity with crossover investor participation by
by quarter quarter
3,000 2,133 $60 700

1,944
2,500 $50 600
1,808
500
2,000 1,026 $40
886 400
1,500 $30
753 300
1,000 $20
474 200
500 249 $10 100
0
$0 0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023* Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
Pre-seed/seed Early-stage VC 2018 2019 2020 2021 2022 2023*
Late-stage VC Venture growth Deal value ($B) Deal count

count basis, they participated in just 183 in Q3. While their annual participation to 62.6%—the highest annual percentage
VC deals in Q3, which is 36.4% lower than as a proportion of overall VC deal count in our dataset, though a couple deals
Q2’s 288 deals. declined to 24.1% during the quarter, heavily bias this data. This contrast
marking the lowest percentage since suggests that many CVCs are embracing
Interestingly, corporate VCs (CVCs) 2015, their annual participation as a a risk-mitigation strategy, favoring quality
have displayed a more nuanced pattern proportion of overall VC deal value surged over quantity. Concentrating larger
capital injections into a select group of
CVC investors’ proportional deal count activity dips to startups with sound fundamentals, core
competencies, and promising growth
eight-year low
prospects serves to alleviate exposure
Deals with nontraditional investor participation as a share of all US VC deal count
to startups struggling amid the current
by investor type
challenging market conditions.
30% 26.5%
24.1% Looking forward to the next few quarters,
25%
nontraditional investor participation
15.0% will likely continue to decline, given the
20%
13.4% 12.1% prevailing high-interest-rate environment
15% 11.5% and dearth of startup exit avenues.
9.3% Nevertheless, a silver lining emerges
10%
6.7% in the form of discounted investment
5% opportunities potentially brought about
0.9% 0.9%
by declining startup valuations. By
0%
capitalizing on these opportunities, these
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
investors may witness a resurgence in
CVC investor PE investor Asset manager participation, potentially breathing some
Government/SWF Other tourist investor life back into the VC ecosystem.
35
Exits
Q3 exit value experiences significant uptick, largely attributed to Instacart and
Klaviyo IPOs
US VC exit activity by quarter
$300 600
$250 500
$200 400
$150 300
$100 200
$50 100
$0 0
2018 2019 2020 2021 2022 2023*
Exit value ($B) Exit count Estimated exit count

In Q3, the exit environment exhibited a Exit count and value creation continue to stagnate
glimmer of hope relative to the subdued
through 2023
nature of the liquidity landscape of the
US VC exit activity
past 18 months. In Q3, we observed $35.8
billion stemming from an estimated 284 1,979
exit events. This exit value represents the
most substantial quarterly performance
1,375
since Q4 2021. 1,266
1,269 1,324
1,126 1,119 1,092
1,043
While at first glance this might suggest 943 752
a revival, a closer look reveals that more
than one-third of the total exit value in Q3
$128.4
$112.4
$103.6
was attributed to just two IPOs: Instacart

$78.0
$76.7
$74.7
$64.9
$51.5
$795.4
$328.8
and Klaviyo. Digging deeper, the post-IPO

$251.9
performance of these companies leaves

much to be desired. Instacart, with a
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
post-money IPO valuation of $8.3 billion,
fell far short of its lofty VC valuation of Exit value ($B) Exit count Estimated exit count
$39.0 billion achieved in 2021. Similarly, PitchBook-NVCA Venture Monitor
Klaviyo’s IPO valuation of $7.6 billion *As of September 30, 2023
marked a notable decline from its last companies—a rarity in the world of VC- for unprofitable companies or those
private, VC-backed round in July 2022, backed, growth-oriented tech unicorns. lacking a clear path to profitability, as
when it was valued at $9.5 billion. Yet, despite having achieved profitability, they may face even greater challenges
they took valuation cuts and have faced in the public markets, where valuations
What is significant about these challenges in their trading performance multiples have compressed.
IPOs is that they involved profitable since going public. This raises concerns
36
Majority of exit value YTD generated via YTD count of exits via acquisitions falls to
public listing; first time since 2021 roughly half of 2022 figure
Share of US VC exit value by type Share of US VC exit count by type
100% Buyout 100% Buyout

90% 90%
Public listing Public listing
80% 80%
Acquisition Acquisition
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
Holistically, Q3’s exit environment was returns. On the other hand, we must also navigate the uncertain private markets in
bittersweet. On one hand, the recent consider the cost of exiting. A substantial pursuit of better terms? The overarching
IPOs of Instacart and Klaviyo could valuation cut experienced in an IPO is question going forward is whether these
be interpreted as a welcoming sign a tough pill to swallow. This presents a developments are indicative of a broader
for VC-backed tech unicorns eager to conundrum for companies seeking to trend or simply outliers in an otherwise
find an exit, illustrating a desire from go public: Do they opt for an exit, albeit lackluster market.
both investors and startups to unlock risking a reduced valuation, or continue to
Seed and Series A startups continue to Median exit sizes for acquisition and
make up the majority of acquired startups public listing remain above 2022 figures
through 2023 Median US VC exit value ($M) by type
Share of US VC round count by round series where next round
is an exit via acquisition
100% D+ $800
90% $700
C
80% $600
B
70% $227.4
$500
60% A
$400
50% Seed $156.6
$300 $93.0
40% Pre-seed
$200 $61.5 $64.5
30% Angel $44.9
$100
20%
10% $0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
0%
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
Acquisition Buyout Public listing

37
Sponsored by
A WORD FROM DELOITTE

Venture capital chronicles of 2023: Pioneering
artificial intelligence, course corrections, and
uncharted waters
Over the years, the ups and downs of all skills that depend on human
VC have resulted in tumultuous and emotional intelligence. Heather Gates
Audit & Assurance
tremendous moments, from global
Private Growth Leader
economic downturns to profound Although AI is hot, other sectors of Deloitte & Touche LLP
advancements in technology. It can venture capital investing are decidedly
With more than
be challenging to have a pulse on cooler. It’s been a year of reset with
30 years of
today’s challenges and tomorrow’s necessary corrections to return to long- financial services
opportunities without having extensive term stability. Over the course of the experience,
knowledge about the industry’s history. past two years, the value of companies Heather serves as the national Private
Thankfully, we can lean on resources like hit astronomical highs,2 and the influx Growth Leader, with oversight of the
Heather Gates, who has over 30 years of overpriced, overvalued companies Deloitte Private, Emerging Growth
of experience in venture capital and created instability. Another factor at play Company, and Private Equity businesses
presents deep knowledge of VC’s past is a less robust IPO market, which is a key within Audit & Assurance.
and present. Journey further to learn driver for investing and valuation activity.
Heather’s insights about the climate of In this case, what went up needed to
toward a more equitable industry, there
the venture capital ecosystem and what come down. But as valuations course
is still a long road ahead.
the future may hold. correct to a traditional level, interest
from venture capitalists and corporate
Impact of the downturn
Exploring the current landscape buyers is expected to be on the rise.
This year’s economic uncertainty comes
AI has dominated the news cycles to
Another factor that is following an with limited exit opportunities and
the point you may be tuning it out,
upward trajectory is the increased lower valuations, ultimately resulting in
but it’s here to stay (for the better) in
focus on addressing DEI issues. The a softer market. While this has affected
every industry, and that’s especially
venture capital industry recognizes companies across the board, the impact
true in venture capital investing. The
that women, racially and ethnically varies greatly between startups and
evolution of AI has skyrocketed to
diverse individuals, and other historically late-stage companies. No matter what
become more robust every day, fueling
underrepresented groups have been part of the lifecycle a company is in,
valuations and growth in the industry.
excluded from equal opportunities funding is critical—but there are certain
We’re only beginning to scratch the
to manage venture funds or hold implications that come with investor
surface of the impact that AI will have
investment decision-making positions. funding at each stage.
on new, innovative companies, which
There’s also been growing interest in
is especially interesting as they are
supporting historically underrepresented Early-stage companies are facing
notorious recipients of VC investment.
founders and investing in diverse teams, challenges because overall investing
For example, in the audit world, AI has
which is just one of the data points is down,4 making the first round of
the potential to tackle mundane tasks
highlighted in the interactive VC Human financing even harder to obtain. Many
such as data collection, processing, and
Capital Survey Dashboard powered venture capitalists are apprehensive
repeatable tasks so people can feel more
by Deloitte, Venture Forward, and the about investing right now because of
fulfilled in their work by focusing on
National Venture Capital Association. 3 economic unpredictability, increased
strategic and complex areas that require
While venture capital has made progress
creativity, dexterity, and empathy—
2: “Q3 2023 Road to Next Report,” Deloitte, September 12, 2023.

3: “VC Human Capital Survey Fourth Edition,” Deloitte, Venture Forward, and National Venture Capital Association, April 18, 2023.
38
Sponsored by
inflation, and other global impacts, growing. When the market is slower, like environment of growth, innovation,
including potential cybersecurity issues. it is right now, venture capitalists and and renewed investor confidence
At this stage, it’s crucial to focus on institutional buyers are more concerned to emerge—painting a promising
building something the world needs to with how much money companies future for VC.
have and then finding people who agree are making and their ability to achieve
with your thesis and trust in your ability positive margins. To pique the interest of Interested in learning more? Dive
to execute. venture capitalists in our current market, into what the future may look like
companies must demonstrate existing for emerging growth companies in
Many late-stage companies raised a profitability or present a clear path to it. Deloitte’s most recent Road to Next, an
lot of money from 2021 to 2022, and analysis of current investment trends
those that managed their funds well Navigating the uncertain future defining the private financial markets.
were able to stretch those investments
Even though we can’t predict exactly
over this year, without having to raise
what will happen next year, we can
more capital. However, it is more This publication contains general information
prepare by keeping a close eye on data
complicated for companies that did only and Deloitte is not, by means of
points that will give us insights into
not take advantage of obtaining money this publication, rendering accounting,
the future of venture capital. More
when valuations were higher or that business, financial, investment, legal, tax,
recently, there’s been an uptick in IPOs or other professional advice or services.
had planned to go public. Now, the
with a few clients making the move to This publication is not a substitute for such
market is fairly tight and raising more
go public. It’s expected that a positive professional advice or services, nor should it
money is critical to move forward. At
trend is on the rise, thereby creating be used as a basis for any decision or action
this stage, it’s important to focus on the
potential opportunities for companies that may affect your business. Before making
fundamentals—ensure your financials
to exit successfully. any decision or taking any action that may
are strong and accurately reported, affect your business, you should consult a
determine if experienced and thoughtful There isn’t a crystal ball that shows us qualified professional advisor.
leadership is in place, and develop what the future of venture capital looks
a fully mapped-out path to growth like, but there are questions to consider Deloitte shall not be responsible for any
and profitability. that can help you predict what may loss sustained by any person who relies on
come next. this publication.
Trends of the past and present
Stay curious about these wonderings: About Deloitte
Despite being in a downturn, there’s a Deloitte refers to one or more of Deloitte
• What is happening in terms of
lot to look forward to with technology Touche Tohmatsu Limited, a UK private
IPO activity? Are we seeing more
rapidly advancing. Between AI and company limited by guarantee (“DTTL”), its
transactions? Is the window
various cloud technologies, there are network of member firms, and their related
more open?
tools to lean on to find success in the entities. DTTL and each of its member firms
years to come. are legally separate and independent entities.
• Where is VC funding headed? At what DTTL (also referred to as “Deloitte Global”)
levels are companies being evaluated? does not provide services to clients. In the
As the pendulum of variables swings
United States, Deloitte refers to one or more
in the world of venture capital, it’s
• Are larger-entity tech layoffs resulting of the US member firms of DTTL, their related
imperative to stay attentive to what
in startup formation? How is this entities that operate using the “Deloitte” name
works and what doesn’t. During 2021
affecting overall employment? in the United States, and their respective
to 2022, we were experiencing a frothy affiliates. Certain services may not be
cycle wherein excessive optimism, available to attest clients under the rules and
Amid the prevailing challenges and
high valuations, and an abundance of regulations of public accounting. Please see
uncertainties in the venture capital
capital were flowing into the startup http://www.deloitte.com/about to learn more
arena and broader capital markets, a
ecosystem.5 When we experience this about our global network of member firms.
sense of optimism is gradually gaining
kind of cycle, venture capitalists place
momentum. As market conditions Copyright © 2023 Deloitte Development LLC.
value on growth, what revenue increases
stabilize, there’s potential for an All rights reserved.
look like, and how quickly companies are
39
Fundraising
Number of US VC funds raised on pace to set a nine-year low
US VC fundraising activity
1,480
1,278
922
782 770
630 657
576
492
338 344
$22.2 $38.2 $42.2 $51.0 $46.5 $71.5 $70.4 $93.2 $163.4 $172.5 $42.7
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Capital raised ($B) Fund count

Several factors explain the ongoing Rolling one-year IRRs remain negative
venture fundraising sluggishness. First, US VC rolling one-year IRRs*
the avenue to public exits—wherein
outsized returns have historically been
generated—have not opened. Without 100%
meaningful value being unlocked in
80%
public exits, GPs have been returning
less capital to LPs, thus leading to an 60%
overall liquidity crunch. Second, while the
denominator effect has likely lessened 40%
for some institutional investors due to
a relative public market rebound, with 20%
elevated interest rates, certain less-risky
0%
asset classes such as private credit have
become more attractive with strong -20%
payouts, which means that venture
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
needs to provide better returns on a
risk-adjusted basis in order to compete. 2018 2019 2020 2021 2022 2023*
Third, many institutional investors have PitchBook-NVCA Venture Monitor
either taken a more cautious approach to *As of March 31, 2023
making large commitments to venture or bundling—stipulations that LPs must alternative sources of capital. The Persian
are constrained by their ability to do so. commit to all funds offered by the firm, as Gulf States have become a popular
During the 2021 and early 2022 market opposed to select strategies—translated fundraising destination. However,
frenzy, many VC managers returned to into dwindled capital availability from not every manager has had success
the market with a shorter turnaround institutional investors’ budget planning. securing fund commitments there. From
time to raise larger funds. On top of a cultural perspective, it takes time to
everything else, the practice of product US GPs have been traveling abroad for build a trusting relationship with LPs
40
52.1% of capital committed to funds with US VC dry powder remains elevated
$500 million AUM or larger YTD through end of 2022 and into Q1 2023
Share of US VC fund value by size bucket US VC dry powder ($B) by vintage
100% $1B+ $350 Total
90%
$500M-$1B $300 2023
80%
$250M-$500M 2022
70% $250
$100M-$250M 2021
60%
$50M-$100M $200 2020
50%
40% <$50M $150 2019
Overhang by
30% vintage
2018
20% $100
2017
10%
$50 2016
0% Cumulative overhang
$0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
*As of September 30, 2023 *As of March 31, 2023
in the region. Additionally, for certain demonstrating why their funds are managers as a proportion of all fund
countries such as Saudi Arabia, venture differentiated from the rest of the crowd value has reached the highest level in
is a relatively new asset class, and and why they are best positioned for our dataset, at 73.3%. While fundraising
many investors are still in the process of executing their strategies. Through Q3, a is never an easy journey, managers who
deepening their understanding of VC. similar number of funds has been raised have not yet established themselves
by emerging and experienced managers are facing severe headwinds, and many
Emerging managers trying to secure for the year. However, the committed expect to see the market weeding out
LP commitments are tasked with capital that goes to established underperforming managers.
First-time funds closed through Q3 2023 Median fund size on par with 2021 level
account for 12.2% of fund value YTD Median and average US VC capital raised ($M)
US VC first-time fundraising activity
396 $180 $164.7

$160
292 $132.1
$140
275 244
253 216 $120
218 217
$100
185
$80
115 81 $60
$40 $25.0 $30.0
$22.2
$10.7
$14.2
$10.3
$12.9
$4.0
$6.0
$8.7
$6.9
$5.3
$20
$6.1
$0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
Capital raised ($B) Fund count Median Average

41
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Methodology
Deals Late stage: Rounds are generally classified is a public market for the shares (IPO) or the
as Series C or D (which we typically aggregate acquisition of majority of the equity by another
We include equity investments into startup together as late stage) either by the series of entity (corporate or financial acquisition). This
companies from an outside source. Investment stock issued in the financing or, if that information does not include secondary sales, further sales
does not necessarily have to be taken from an is unavailable, by a series of factors, including after the initial liquidity event, or bankruptcies.
institutional investor. This can include investment the age of the company, prior financing history, M&A value is based on reported or disclosed
from individual angel investors, angel groups, company status, participating investors, and more. figures, with no estimation used to assess
seed funds, VC firms, corporate venture firms, the value of transactions for which the actual
corporate investors, and institutions, among Venture growth: Rounds are generally classified deal size is unknown. IPO value is based on the
others. Investments received as part of an as Series E or later (which we typically aggregate pre-money valuation of the company at its IPO
accelerator program are not included; however, if together as venture growth) either by the series of price. One slight methodology update is the
the accelerator continues to invest in follow-on stock issued in the financing or, if that information categorical change from “IPO” to “public listings”
rounds, those further financings are included. All is unavailable, by a series of factors, including to accommodate the different ways we track
financings are of companies headquartered in the the age of the company, number of VC rounds, VC-backed companies’ transitions to the public
US, with any reference to “ecosystem” defined as company status, participating investors, and more. markets. To give readers a fuller picture of the
the combined statistical area (CSA). We include companies that go public, this updated grouping
deals that include partial debt and equity. Nontraditional investors: “CVC” includes rounds includes IPOs, direct listings, and reverse mergers
executed by established CVC arms as well as direct via SPACs.
Angel: We define financings as angel rounds equity investments by corporations into VC-backed
if there are no PE or VC firms involved in the companies. “PE” includes VC deals by investors Fundraising
financing round, and individual investors have whose primary classification is PE/buyout, growth,
participated. “Angel” is no longer included in our mezzanine, or other private equity. “Crossover” We define VC funds as pools of capital raised
stage methodologies, as deals tagged as angel investors are a subset of nontraditional investors— for the purpose of investing in the equity of
can be into companies that can be of different specifically asset managers, hedge funds, mutual startup companies. In addition to funds raised
development levels. However, these deals can funds, and sovereign wealth funds—that have been by traditional VC firms, PitchBook also includes
show up within the report through investor-type- active in VC investment across any stage. They are funds raised by any institution with the primary
specific deal activity. referred to as crossover because these investors intent stated above. Funds identifying as growth
are likely to be participating at the late stages stage vehicles are classified as PE funds and are
Pre-seed/seed: When the investors and/or press directly prior to an exit. not included in this report. A fund’s location is
release state that a round is a pre-seed or seed determined by the country in which the fund’s
financing, it is tagged as such. If the company Venture debt: The venture debt dataset is investment team is based; if that information is
is under two years old and the round is the first inclusive of all types of debt products raised by not explicitly known, the HQ country of the fund’s
institutional investment in the company, the deal VC-backed companies, regardless of the stage of general partner is used. Only funds based in the
will be tagged as pre-seed unless otherwise stated. company. In mixed equity and debt transactions, United States that have held their final close are
Regulatory filings under $10 million for deals equity is excluded when the amount is of known included in the fundraising numbers. The entirety
where investors are unknown are classified as seed value. Financings that are solely debt are included of a fund’s committed capital is attributed to
unless pre-seed parameters are met. in this dataset, though not incorporated into the year of the final close of the fund. Interim
the deal activity dataset used throughout the close amounts are not recorded in the year of the
Early stage: Rounds are generally classified report. Mixed equity and debt transactions will be interim close.
as Series A or B (which we typically aggregate included in both datasets.
together as early stage) either by the series of
stock issued in the financing or, if that information Exits
is unavailable, by a series of factors, including
the age of the company, prior financing history, We include the first majority liquidity event for
company status, participating investors, and more. holders of equity securities of venture-backed
companies. This includes events where there
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Q3 2023

The definitive review of the US venture capital ecosystem

National Venture Capital Association

Regional spotlight 22 J.P. Morgan Commercial Banking

Contact J.P. Morgan

Exits 36 Dentons Global Venture Technology

Fundraising 40 Contact Dentons

Deloitte & Touche LLP Audit &

Optimize your portfolio companies’ workforce and bolster your

*Source: Gallup’s 2020 Employee Engagement Meta-Analysis

2018 2019 2020 2021 2022 2023*

Low public multiples damaging IPOs

IPO index remains down 50% since January 2022

Backlog could set stage for busy market

PitchBook-NVCA Venture Monitor

See how we can support your growth

2018 2019 2020 2021 2022 2023*

Deal value ($B) Deal count Estimated deal count

Pre-seed deal value ($B) Seed deal value ($B)

$1.5 $1.4 $1.4 $6 $5.0 $5.3

Deal value ($B) Deal count Estimated deal count

of concept (POCs) or pilots to recurring

A WORD FROM INSPERITY

Q3 would have been a continuation

attesting to severe challenges that

mature startups have encountered with

pace of capital deployment. In the

2018 2019 2020 2021 2022 2023*

Deal value ($B) Deal count Estimated deal count

In Q3, this stage recorded $6.6 billion in 832

from 228 in Q2—representing the $27.3

lowest quarterly deal count in nearly 14

for venture-growth startups sits at $11.4

A WORD FROM J.P. MORGAN

Venture growth 67.7% 32.3% Venture growth 50.0% 50.0%

Los Angeles Boston Austin

Analytic Customer Enterprise Supply chain Knowledge Other application

Other application software deal value lifted by OpenAI megadeal in Q1 2023

$8,200.0 $5,951.7 $20,926.9 $2,404.6 $2,311.5 $14,437.5

Analytic Customer Enterprise Supply chain Knowledge Other application

567 100% Venture growth

$50 $44.9 $600

PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor

Deal value ($M) Deal count

Investment in EV segment garners lion’s share of value for TTM

Deal value ($M) Deal count Smart transit

Last-mile delivery Marine Micromobility Public mobility solutions Ridehailing

Last-mile delivery Marine Micromobility Public mobility solutions Ridehailing

30% 30% 28.1%

20% 20% 18.2%

PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor

PitchBook-NVCA Venture Monitor

A WORD FROM DENTONS GLOBAL VENTURE TECHNOLOGY GROUP

2018 2019 2020 2021 2022 2023*

Deal value ($B) Deal count Estimated deal count

constraining the capital availability across

all venture stages—particularly for late-