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Venture capital volumes fall sharply

In the third quarter of 2022, the effects of the economic downturn appear to be filtering through as investors take risk off the table.

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Startups received less than half as much funding from venture capital investors in the third quarter of 2022, according to data from Crunchbase.

Venture funding for the three months ending 30 September 2022 totalled $81bn, down by $90bn (53 per cent) year on year and by $40bn (33 per cent) compared with the second quarter of 2022.

The global economic crisis, sparked by the Russian invasion of Ukraine, high inflation, supply chain disruption owing the pandemic as well soaring energy prices, has prompted the falls. 

While these inter-related factors began at the start of 2022, it is only now that we are seeing its effects in the form of a pullback from VC investors. 

This is likely due to the lagged effect of many deals. It is the lowest quarter in funding terms since the first quarter of 2020 when $70.6bn of venture funding was raised.

Much of the falls can be attributed to fewer later-stage deals which make up a substantial base of total funding. While $40bn was raised overall by later-stage firms, this represents a 40 per cent quarter-on-quarter fall and a 63 per cent year-on-year fall.  

Seed stage funding was much less impacted. While it was down compared with the second quarter of this year, it remained flat compared to Q3 2021.

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