US Venture Capital Trends 2023 (part 1)

Outlook for US Venture Capital for 2023 from Pitchbook (Part 1)

Pitchbook as the hugest data source for Venture Capital posted its’ predictions for a coming 2023 year.
First and the most general prediction – The Morningstar PitchBook US Unicorn Index will show a negative return in 2023. The reason is a significant decrease in the pace of new unicorn creation, and the pace of unicorn rounds in general. For example, in January less than 10 completed rounds resulted in a post-money valuation of $1.0 billion or more, well below the 48 completed in January.
Secondly, Series C and D rounds will see the most down rounds. The rationale for this is that companies on these rounds are more starved for capital. In Q4 2022, 3.5 times more capital was demanded than deal value observed.

Thirdly, seed-stage startup valuations and deal sizes will continue their ascent, reaching new annual highs despite a slowdown in total deal value and count. Economic and financial market conditions force investors, traditionally allocating capital to late-stage startups, move upstream targeting the earlier stage to capture larger returns and secure access to promising startups.

Fourthly, SPAC IPOs and mergers will continue to decline while liquidations will continue to increase in 2023. Combined effect from elevated market volatility and rising interest rates significantly strokes private and public valuations and depressed consumer buying and borrowing power. Additionally, regulatory scrutiny hit SPACs value propositions such as reaching public markets faster than a traditional IPO.
In general, these trends show that late-stage VC investments will continue to cool in 2023, what will lead to lower exits and valuations. On the other hand, seed investments may be a lifeline for many funds and asset managers.