Global VC Investment falls to $77.05 billion in Q3’23 – a seventh straight quarter of decline, according to KPMG Private Enterprise’s Venture Pulse

• Global VC deals volume drops to a level not seen since Q4’16
• Europe sees VC investment rise to $17.3 billion on back of two $1 billion+ megadeals
• VC investment drops to $34.6 billion in Americas and $20.3 billion in Asia-Pacific

Global VC investment fell from $81.4 billion across 9,563 deals in Q2’23 to $73 billion across 7,434 deals in Q3’23 as VC investors continued to act cautiously, taking much longer to make deals than in recent quarters, intensifying their due diligence, business models and the paths to profitability of startups looking for investment. Both total global investment and deal volume reflected multi-year lows; VC investment in Q3’23 was the lowest since Q3’16 while VC deal volume was the lowest since Q2’19, according to the Q3’23 edition of KPMG’s Venture Pulse – a quarterly report highlighting VC investment trends globally and in key regions around the world.

On a regional basis, Europe managed to buck the downward investment trend, attracting $17.3 billion in Q3’23 compared to $16.4 billion in Q2’23. This occurred despite a decline in deal volume from 2,454 to 1,671 during the same period. Two $1 billion+ megadeals accounted for more than the difference in investment quarter-over-quarter: a $2.3 billion raise by France-based battery company Verkor and a $1.6 billion raise by Sweden’s green steel manufacturing company H2 Green Steel. The two megadeals highlight the incredible strength of the cleantech market in terms of attracting large VC investments.

VC investment in other regions of the world was quite weak compared to recent historical norms. In the Americas, VC investment dropped to $38.6 billion—its lowest level since Q4’19; the US continued to account for the majority of this investment ($36.7 billion).). VC in the Asia-Pacific region, meanwhile, dropped to $20.3 billion—its lowest level since Q1’17.

Exit activity provided a glimmer of hope for the global VC market in late Q3’23—with exit value reaching $82.8 billion in Q3’23, up from $53.3 billion in Q2’22. The IPO exits of UK-based Arm and US-based Instacart and Klaviyo late in the quarter contributed significantly to this increase. The positive exit activity was particularly noticeable in the US, where exits have been incredibly few and far between since Q4’21, when exit value was $198 billion. After three straight quarters of under $10 billion in exit value, the US saw an increase to $35.8 billion in Q3’23.

“The IPOs of Arm, Instacart, and Klaviyo were a much-needed signal regarding exits. While the results were a bit mixed, the fact that the IPOs occurred could be a sign that the exit environment is turning and that the window for IPOs is on the cusp of reopening,” said Conor Moore, Head of KPMG Private Enterprise in the Americas Region & Leader, KPMG Private Enterprise Emerging Giants Network, KPMG in the US. “The next quarter or two will be key to watch. If we see more IPOs, and they do reasonably well, we could start to see some recent trends being reversed.”

Q3’23—Key Highlights

· Global VC investment dropped from $81.4 billion across 9,563 in Q2’23 to $77.05 billion across 7,435 deals in Q3’23.

· VC investment in Europe rose from $16.4 billion to $17.3 billion quarter-over-quarter.

· The Americas accounted for $38.6 billion in VC investment in Q3’23 (a drop from $39.8 billion in Q2’23). The US accounted for $36.7 billion of this total – down from $37 billion in Q2’23.

· VC investment in the Asia-Pacific also dropped from $24.2 billion in Q2’23 to $20.3 billion in Q3’23.

· Global Corporate VC-participating investment grew only slightly from $39.1 billion in Q2’23 to $40.4 billion in Q3’23.

· Global unicorn deal value barely increased but stayed at a low level, accounting for just $15.75 billion in Q3’23—the lowest quarter for unicorn deals in over six years.

· Exit value grew from $53.3 billion in Q2’22 to $82.8 billion in Q3’23.

Cleantech, including EV, accounts for more than half of largest VC deals in Q3’23

Cleantech continued to attract many of the largest deals this quarter, including a $2.3 billion raise by France-based battery company Verkor, a $1.6 billion raise by Sweden-based green steel maker H2 Green Steel, and a $997.2 million raise by US-based lithium-ion battery recycling company Redwood Materials.

Three China-based EV companies were also among the largest deals this quarter, including a $1 billion raise by Rox Motor, a $969 million raise by Neta Auto, and a $600 million raise by Farizon.

Investor interest in AI continues to accelerate

AI continued to attract increasing interest from VC investors globally and across regions, including a $631.6 million raise by UK-based Conigital—a company focused on fleet automation, a $500 million raise by US-based cloud data platform Databricks, a $414.8 million raise by China-based intelligent EV manufacturer Avatr Technology, and a $225.9 million raise by Germany-based defense AI company Helsing.

Steady course expected in Q4’23

VC investment is expected to remain relatively soft heading into Q4’23, given ongoing uncertainties in the global VC market and a heightened level of investor caution. Energy, cleantech, and AI, however, are expected to remain highly attractive to VC investors across much of the world. The major question heading into the end of the year is whether there will be any additional IPO activity in the wake of the three IPOs in late 2023. Although a dramatic reopening of the IPO market is not expected, additional exits could spark a renewal in IPO activity heading into the first half of 2024.

“So far AI has dominated the headlines in 2023, but as we head into Q4’23, will Cleantech begin to rival AI?” said Jonathan Lavender, Global Head, KPMG Private Enterprise, KPMG International.

“The green space is evolving rapidly and Cleantech and related energy independence, are pulling in large financings globally. Legislation ranging from the US Investment Reduction Act to large subsidies, tax breaks and regulatory overhauls in Europe are increasingly capturing the attention of accelerators looking to support startup ecosystems in this high growth sector.”

For more information, contact:

Daniel Caines,

Senior Manager, Global External Communications, KPMG International

T: +44 7732400262

E: Daniel.Caines@kpmg.co.uk

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