The US venture capital market cools down as investors cautiously make their moves
The U.S. venture capital market is cautious in the face of economic uncertainty, with the PitchBook-NVCA report showing a transaction volume of approximately $37.5 billion in the third quarter, a nearly 32% decrease from the previous quarter. Despite the rise in the U.S. stock market, venture capital still faces challenges, with investors imposing stricter terms on startups, leading many companies to postpone financing. Artificial intelligence companies receive the most attention, and it is expected that a Fed rate cut will stimulate trading activity, while a revival in the IPO market may provide more exit opportunities for investors. Leading startups choose to remain private, and the increasing attractiveness of the private market may result in more companies delaying their IPOs
According to the Zhītōng Finance and Economics APP, a report released by PitchBook-NVCA on Thursday showed that in the face of economic uncertainty, U.S. venture capital investors remain cautious about transactions. The report revealed that a total of approximately $37.5 billion worth of transactions were completed in the third quarter, representing a nearly 32% decrease compared to the previous period. This highlights the challenges faced by the venture capital industry despite the strong momentum in the U.S. stock market.
Limited liquidity has led investors to negotiate stricter terms with startups, causing many companies to postpone financing until conditions improve.
The report emphasized the challenges in the venture capital sector, with the focus currently on the large-scale financing of artificial intelligence companies. The report stated, "Artificial intelligence companies have received the most attention in the venture capital sector."
Although transaction activities have slowed down, a rate cut by the Federal Reserve could stimulate transaction activities. Emily Zheng, a venture capital analyst at PitchBook, stated, "While a 50 basis point cut may not be enough to kickstart the venture capital industry, it is a step in the right direction."
The revival of the IPO market may provide investors with more opportunities to exit investments, further accelerating venture capital transactions.
Longer Time in Private
Leading startups such as Stripe, OpenAI, and SpaceX have chosen to remain private for a longer period, offering liquidity to employees through stock issuance rather than utilizing the public market. Emily Zheng mentioned, "The secondary market is a win-win situation. Companies can stay private for longer, and investors seeking liquidity can also obtain it."
The increasing attractiveness of private assets may also lead some companies to delay IPOs, especially if they can secure sufficient funding from private market investors.
Howe Ng, Director of Analysis and Investment Solutions at Forge Global (FRGE.US), stated, "Democratization is on the horizon, the private market will continue to open up, and this new asset class will persist."