Fundraising is falling, but VCs have more money than ever

According to a report by CB Insights, global startup funding fell by 23% in Q2 2022 from Q1, including by 25% in the US. However, US-based VCs raised a record-breaking $73.8B in Q1.

Why should we care?
VCs may be flush with cash for now, but their newly conservative fundraising practices suggest they anticipate a slowing trickle of cash from LPs in the coming months, in addition to less promising ROI from the larger startups in their portfolios. Fundraising rounds above $100 million have fallen by 31% over the past quarter, while early-stage investments have become the norm, making up 64% of deals in 2022. “We’re seeing VCs increasingly advising companies seeking funding that if they have sufficient runway, it may be optimal to wait until the market returns to a more predictable, normal state,” said Sharla Grass, Principal at VC firm Greycroft. As Jane Podbelskaya, Principal at Canada-based Information Venture Partners, told The Financial Revolutionist last month, these shifting winds can work in early-stage startups’ favor, letting them catch up to the bigger fish who have to adopt drastic cost-cutting measures to survive current volatility. The playing field between established fintechs and up-and-coming challengers may soon look dramatically different as a result.