Q2 VC Funding Globally Falls Significantly As Startup Investors Pull Back, wrote Crunchbase.
Global funding slowed dramatically in the second quarter of 2022 as investors shied away from later-stage funding bets. It also marked the first quarter with a significant drop in funding since the beginning of 2020.
Funding reached $120 billion, the lowest amount recorded for a single quarter since the beginning of 2021, Crunchbase data shows.
Second-quarter funding fell 26% quarter over quarter from $162 billion in the first quarter and 27% year over year from $165 billion in the second quarter of 2021.
Clearly, startups have started to feel the heat of global economic turmoil. The larger American economy, home to the world’s largest technology startup and venture capital markets, could be in a recession right now.
The stock market is down around 18% overall (give or take a few percentage points depending on the day), and tech stocks have seen a drop closer to 30%. Given that these tech companies made up around 25% of the S&P 500 in 2021, they’re not just falling faster than anything else — they’re a significant factor in why the stock market overall is declining. The Tiger Global Fund, for example, which focuses on the internet, software, and fintech sectors, lost 52% just in the past year.
This means investments less funding and investments for startups. . Global venture funding in May 2022 reached $39 billion, Crunchbase data shows, marking the first month in more than a year when it dropped below $40 billion.
All in all, VC funding in May fell 14% month over month from $45 billion in April. It’s down 20% from $49 billion a year earlier in May 2021. The largest pullback was in late-stage venture capital, which fell from 2021 monthly averages by close to 40%. Continue reading on Crunchbase
Inflation in Major Markets Will ‘Peak Then Retreat’
While inflation will be at levels higher than many investors have seen before, Morgan Stanley economists believe prices will soon “peak then retreat”(opens in a new tab) as supply chain pressures ease and prices for many commodities normalize. To that end, central banks likely won’t take drastic measures to raise rates and pump the brakes on growth. That said, investors have an almost Pavlovian response to any talk of tightening, which is just one of many reasons to approach U.S. equities and Treasuries with caution.
Emerging markets seem primed for growth, but it’s too early to be all-out bullish those markets, say strategists. “In China, headwinds from energy prices, regulation and COVID remain, and our expectations don’t call for major policy easing, at least not yet,” says Sheets. “The one exception is high-yield credit in China, where we think that the market is underestimating the resolve and ability of policymakers to control the disruption in the property sector.” Learn more about what Morgan Stanley strategists say.
Startup recession or not?
Goldman thinks that we’re going to avoid a recession with a paltry bit of growth when Q2 data settles. The Atlanta Fed thinks we might land in a recession. We’ll see, but the smart money is not entirely sure yet which way the economy is heading.
The startup market feels similar. Venture investors have been ringing alarm bells for months now, and the IPO market is as dead as hopes for a post-Brexit boom. It’s easy to find commentary from various actors in the startup business — both those building and those investing — noting that the market is a mess and that many upstart technology companies are in for a drubbing. Read the rest on Techcrunch.