Global venture capital (VC) investment fell slightly from $83.8 billion across 9,458 deals in Q4’23 to $75.9 billion across 7,520 deals in Q1’24 amid geopolitical tensions, the extended drought in exits among VC-backed companies, and a continued pullback in investment at later deal stages.
The level of VC investment in Q1’24 was the lowest since Q2’19, while the number of VC deals was the lowest since Q2’16, according to the Q1’24 edition of KPMG Private Enterprise’s Venture Pulse—a quarterly report that shines a spotlight on VC investment trends globally across key jurisdictions around the world. China also saw two $1 billion+ megadeals during the quarter.
VC investment dropped in both the Americas and Asia this quarter, while it rose in Europe. The Americas accounted for almost half of global VC funding in Q1’24 ($38.2 billion across 3,205 deals), with the U.S. accounting for the vast majority of this amount ($36.6 billion across 2,882 deals). Meanwhile, Asia-Pacific attracted $18.9 billion across 2,305 deals, while Europe saw $17.9 billion across 1,798 deals. However, global exit activity remains muted, falling from $49.8 billion in Q4’23 to $30.7 billion in Q1’24—the lowest level since Q4’16.
“Given how dry the exit environment has been for the last eighteen months, it’s no surprise VC investors are being very conservative in their deal-making right now,” said Conor Moore, Global Head, KPMG Private Enterprise, KPMG International.
“VC investors, including corporate investors, are really tightening their purse strings, particularly at the later deal stages. The only real exceptions we’re seeing right now are companies focused on AI or cleantech, which may soon extend to include cybersecurity as corporations look to manage their AI-driven cyber risk,” added Moore.
Here are some of the key highlights of the report:
The cleantech and AI sectors account for eight of the top ten deals globally in Q1'24
Cleantech and AI proved to be the exceptions to the rule when it came to the downturn in global VC investment, with each sector attracting strong investment in Q1’24. Together, the two industries accounted for eight of the top ten deals globally this quarter.
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The USA accounts for $32.7 billion of the $36.4 billion of VC investment in the Americas in Q3'23
VC investment in the Americas fell to its lowest level since Q4’19, with just $38.2 billion in VC investment across 3,205 deals in Q1’24. The U.S. accounted for the vast majority of this amount—$36.6 billion across 2,882 deals. In addition to AI and cleantech, health and biotech were big winners in the Americas.
VC investment outside of the U.S. was very quiet in Q1’24. In Canada, VC investment dropped to a 22-quarter low of $766 million between Q4’23 and Q1’24.
Europe sees VC investment grow due to the H2 Green Steel megadeal
Europe was the only region to see VC investment increase this quarter—from $15.1 billion in Q4’23 to $17.9 billion in Q1’24, although the number of deals dropped from 2,419 to 1,798 over the same period.
At a jurisdictional level, the Nordic region and France saw VC investment increase—to $6.3 billion and $2.3 billion, respectively; meanwhile, VC investment in the U.K. and Germany dropped—to $3 billion and $1.8 billion, respectively.
VC investment in Asia-Pacific sinks to a seven-year low
VC investment in the Asia-Pacific region dropped from $22.9 billion in Q4’23 to $18.9 billion in Q1’24—the lowest quarter of investment since Q1’17.
VC investment and the number of VC deals rose in India
In India, both VC investment and the number of VC deals rose, from $1.6 billion across 313 deals in Q4’23 to $3.2 billion across 354 deals in Q1’24. Fintech continued to attract good attention, although at smaller deal values.
Nitish Poddar, Partner and National Leader, Private Equity, KPMG in India, said, “As expected, India has seen an uptick in VC investments despite the deal activity being muted in Asia. This will only increase in the coming quarters given our robust GDP growth, strong demographics, and expectation of a stable government at the center. AI, power tech, health tech, and agritech are some key sectors to watch out for.”
All eyes are on the U.S. IPO market heading into Q2'24
While there will not likely be a major increase in VC investment globally during Q2’24 due to the ongoing macroeconomic uncertainty and lack of exits, all eyes will be watching the U.S. IPO markets quite carefully. Should there be a few successful IPOs to start the quarter, there could be some pressure on VC firms to open their funding taps a bit wider.
