Although research has shown that there is a lot of “dry powder” available (see this article), venture capital investments are down across the globe in Q3 2022. Below we summarize the funding landscape in The Netherlands, Europe and the US with links to more in-depth research.
According to the Dutch Quarterly Startup Report, investments in startups and scaleups in the Netherlands are at the lowest level in two years. In Q3 2022, €480 million in venture capital was raised, compared to €1.5 billion in Q3 2021, a decline of 68%. Investors in the Netherlands have become a lot more cautious now that interest rates are rising. The number of deals (99) is slightly higher this year compared to the same quarter last year, but the number of deals larger than 100 million, which made last year a record year, is now significantly lower, which explains the big difference. Investors invested more in the early phase (<€10 million) and less above that. It is particularly striking that the last category of larger investments almost all ended up in climate start-ups.
Europe as a whole is not doing much better than the Netherlands, also hitting its lowest point in nearly two years. But in contradiction to the Netherlands, this was driven primarily by a drop in early-stage investments. According to this article, investor funding for Q3 2022 in Europe totaled only $16 billion, down 44% year over year from $28 billion in Q3 2021, and down 35% quarter over quarter from $24 billion in Q1 2022.
Venture capital investment in the US continued to weaken from the record-setting levels of 2021, declining by 37% in Q3 2022, from $60 billion in Q2 to $37 billion invested according to a study by EY. Even with this significant drop-off, 2022 is already the second-highest investment year on record. While all deal classes were down significantly, late-stage deals were down more than 50%, driven by a lack of mega-rounds.
So the big question is, will this trend continue in the coming quarters? And are these declines worrying, or are we just recalibrating back to the normal levels from a few years ago?
Want to hear our thoughts? Drop us a line at hello@mastersofscale.nl.