US Venture Capital Trends 2023 (part 2)

Outlook for US Venture Capital for 2023 from Pitchbook (Part 2)

In the previous part of the overview of Pitchbook US VC predictions for 2023, we found out that late-stage VC investments will continue to cool, what will lead to fewer number of exits and lower valuations.
The fFifth prediction is devoted to deal value in the growth stage. Pitchbook’s analysts forecast that venture growth deal value will fall below $50 billion in the US. The rationale is that simply fewer companies will look to raise at the growth stage, instead focusing on sustainable growth and cost-cutting.

The sixth prediction – 2023 US VC mega-round activity will fall below 400 deals, what hits a three-year low. Pitchbook defines Mega-rounds as those, which deal size exceeds $100m. Recently, cheap liquidity and huge dry powder of VC funds encouraged a growth-at-all-costs mentality, but approaching recession forced to focus on the capital efficiency and profitability path.

The seventh and final prediction – US VC fundraising will fall between $120 billion and $130 billion in 2023. Declining public equity valuations can create a “denominator effect” for many LPs, whose venture asset holdings become too large relative to other asset classes outlined in their mandates. Also, declining public market valuations create an additional liquidity crunch for many LPs and create lower-risk opportunities for LP capital in other asset classes.

To conclude, Venture Capital market in 2023 returns to pre-covid conditions with reasonable valuations and investment round sizes. GP’s will be forced to more carefully select deals, as sufficient upside in the deals is not a common setup from now on.