Global venture capital activity saw a significant decline in Q3 2024, indicating that both venture investments and exits are expected to remain weak throughout the year. According to the Q3 2024 PitchBook/NVCA Venture Monitor, all metrics—including the number of deals, average deal size, VC fundraising, exits, and total capital raised—reflected a lackluster performance. Notably, no particular region demonstrated exceptional growth, as reported by PitchBook and the National Venture Capital Association.
PitchBook’s lead VC analyst, Kyle Stanford, noted that dealmaking in the U.S. experienced its first quarter-over-quarter decline in a year, with approximately 3,777 VC investment deals completed, reverting to pre-2021 levels. While median valuations at various stages remain high, they are being pressured downward as previously inflated valuations adjust. Q3 marked the lowest deal value of the year, primarily due to a scarcity of substantial funding rounds. Though median deal sizes have increased from 2023, they still fall short of 2021’s median, with stronger companies managing to secure larger deals to navigate the market slowdown.
In terms of global VC deal activity by region, exits continued to struggle. Only 10 companies achieved public listings in the U.S., resulting in a total exit value of $11.2 billion for the quarter. The significant population of firms trapped in the private market further hampers distributions to limited partners, intensifying challenges within the VC landscape.
Despite the overall market sluggishness, Stanford pointed out a slight glimmer of hope: the Federal Reserve's interest rate cut in September may ease borrowing costs and relieve pressure on public markets, potentially facilitating future company registrations. M&A activity remains slow due to regulatory challenges and current market conditions.
As we prepare to close out 2024, the year is on track to be the second consecutive weak year, with only $64 billion raised across U.S. VC funds. This low fundraising level corresponds with diminished distributions and disappointing returns generated over recent years. While fundraising figures match those of 2020, the challenges faced by numerous private VC-backed companies exert additional strain on capital resources. Limited partners continue to direct a significant portion of their capital to established managers and larger funds, thereby consolidating investment opportunities.
In Europe, Q3 2024 experienced a slight decline in VC deal activity compared to Q2, despite a brief surge in deal value earlier in the year. The number of deals completed has decreased quarter-over-quarter as investors exercise greater selectivity. However, with easing monetary policy and stabilizing inflation rates, there are optimistic indicators as we approach the end of the year.
Through Q3 2024, exit values have already exceeded total figures from 2023, generating optimism in the markets. Yet, the scarcity of major VC-backed exits over the prior two years raises concerns about valuations, returns, and volatility. Both founders and investors are keen to protect the substantial value accumulated in their portfolios.
Fundraising trends through Q3 2024 remain flat compared to the previous year, as macroeconomic conditions and a challenging exit environment complicate efforts. While larger funds have completed closures this year, substantial capital is still locked in portfolio companies awaiting exit opportunities. If exits improve, fundraising could see a rebound in 2025.
In Asia, venture capital activity has remained sluggish in 2024, with only $14.9 billion invested during Q3—the lowest figure since Q1 2017. The decline in China’s venture market has significantly impacted overall financing. Other markets, including India and Southeast Asia, are not gaining momentum either. The deal count in Asia during Q3 (2,143) was less than half of the record 4,704 reached in Q4 2021.
Notably, Asia achieved the highest exit value in Q3, driven largely by the IPO of India’s Ola Electric, contributing over $3 billion to the total. Four of the six largest exits of the quarter took place in Asia, all in the form of IPOs.
Nonetheless, fundraising in Asia has remained tepid, with just $53.1 billion committed over the year’s first three quarters. Projections suggest that 2024 will likely end with totals similar to the $84.8 billion raised in 2023, marking the past two years as the only instances since 2017 where total fundraising fell below $100 billion.
In Latin America, Q3 2024 has seen slow deal-making activity, largely as non-domestic investors retreat from their previously active strategies. The reduced exit activity has heightened investment risks within the region, with only $1 billion invested during Q3, leading to an annual total projected just over $4 billion.
Overall, the decline in global VC deals in 2024 is pronounced. Fundraising has been directly affected by the lack of exits and low distributions returned to limited partners. As a result, many LPs are diversifying their portfolios, limiting their commitments to just 10 funds closed this year in Latin America. The current pace suggests that 2024 may become the lowest year for total commitments observed in the past decade.
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