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A new first-look report out early Tuesday from PitchBook-NVCA Venture Monitor reveals a challenging landscape for global venture capital dealmaking amid macroeconomic uncertainties.

In the second quarter of 2024, there was a slight uptick in global deal value driven by a few large transactions, but overall deal activity remained sluggish. A high number of VC-backed companies globally are said to be under pressure from the lower available capital, causing some back into the market to raise further private funds because exits cannot be achieved.

Fundraising figures globally were found to be particularly slow and halfway through 2024 are on track to see the lowest total commitments since 2015. The reasons behind the slowdown include a high rate of recommitments to the strategy global limited partnerships realized over the past few years, as investors — particularly in 2021 and early 2022 — came back to raise new funds at a much quicker pace. Now that distributions have slowed, many LPs are unable to re-up commitments to their unbalanced portfolios.

The report highlights that midsized and large mergers and acquisitions are missing from the global venture market. Although acquisition counts have remained relatively high, a large majority of the deals have been small. The market is noted as being fertile ground for tech roll-ups and discount bargains, but larger deals have not been as forthcoming because of the impact on the acquirer’s bottom line.

In the U.S. in the second quarter, deal activity increased on a count basis for the third straight quarter, indicating that deals are getting done, but a lengthening exit slowdown is pressuring companies back into a market that is less forgiving than companies are used to.

Essentially the problem is not enough exits because there aren’t enough companies snapping up startups. There was an uptick in exits in the second quarter driven by small deals, but the total exit value in the quarter was $23.6 billion, less than in the previous quarter.

Despite two high-profile initial public offerings in the quarter — UL Solutions Inc. raising $964.4 million on April 13 and Rubrik Inc. raising $752 million on April 24 — the IPO market has faltered in its restart.

“For VC returns to see an increase, large tech companies must begin to list publicly at a higher pace than we have seen through the first half of the year,” the report states. “Exit value is pacing better than both 2022 and 2023, yet outside of those years, the market is facing its lowest exit total since 2016.”

The outlook for new funding also remains somewhat muted, with VC funds raising only $37.4 billion in the first half of the year. Though the number sounds impressive, the raises were dominated by a few large firms, with Andreessen Horowitz raising $7 billion and Norwest Venture Partners LP and Technology Crossover Ventures LP raising $3 billion each. “Billion-dollar funds have been raised, but potentially at the expense of smaller, emerging managers,” the report notes.

Photo: Shannon Clark/Flickr

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