NVCA 2023 Yearbook: U.S. VC Fundraising Reaches New Heights Amid Industry Challenges

For years, venture capital has changed the world, but 2022 was the year that changed venture capital. The U.S. VC ecosystem ended 2022 with 16,464 VC deals (more than half of which took place in H1), with $240.93 billion invested into American companies, the second-highest year on record, behind 2021. While headline figures for the year compare favorably to the recent past, closer scrutiny reveals an industry that has adapted to meet the challenges of a world in flux, according to the National Venture Capital Association (NVCA) 2023 Yearbook, with data provided by PitchBook.

The U.S. venture ecosystem began 2022 with optimism as Q1 deal activity approached records set in 2021, but a mixture of new strategic challenges abroad combined with high inflation, rising interest rates, and an unstable labor market caused the market to stumble in the year’s second half and deal activity to drop by a significant margin.

By Q3, deal counts decreased, deal values increased, and valuations dropped. To bolster positions against an uncertain future, investors and entrepreneurs stockpiled funds and cut costs, while policymakers outlined ambitious programs to safeguard the nation’s economy. By the end of Q4, 784 funds raised $163 billion, and investors sat on a record $312 billion of dry powder ($1,000 for every American) while demand for venture funding outstripped supply by more than 2 to 11.

As a result, VCs entered 2023 well-positioned to invest in potential opportunities with new excitement about Congress’s infusion of hundreds of billions of dollars to support technologies critical to improving U.S. national security and economic competitiveness. But tensions heightened in March 2023 as the industry faced its latest stress test and federal action was required following the failure of two of the most active financial service providers to the startup ecosystem. “When the leaders of America’s fledgling venture capital sector founded NVCA 50 years ago, they designed the organization to serve as the voice of the U.S. venture capital and startup community, said Bobby Franklin, NVCA President and CEO. “The road ahead is going to require our community to be smarter, tougher, and more resourceful as we seek to empower the entrepreneurs who will change the world. It’s an incredible challenge, but we’re up to it.”

Franklin added that while “venture capital is about progress, and the path forward is as daunting as it has ever been,” NVCA will continue to serve as the key advocate for the innovation economy by translating the needs of the public and private sectors to ensure that the U.S. remains the best country in the world for innovators to turn their dreams into reality.

Highlights of the U.S. Venture Industry in 2022

• 4,825 companies raised first-time funding (the first round of equity funding in a startup by an institutional venture investor) and attracted $23.7 billion, with both metrics comparing favorably to 2021 records.
• First-time deals accounted for 31% of the total deal count and nearly 10% of the total deal value.
• Median fund size of $40.6 million was at a 13-year high and total AUM was at $1.1 trillion.
• Exits decreased precipitously, with a 36% drop in exit count from 2021 to 2022 and a 90% drop in exit values over the same period.

Venture Across the Country

• Almost every state saw an increase in VC AUM in 2022 with emerging ecosystems like Wisconsin and North Carolina and Indiana seeing some of the greatest gains.
• Overall deal flow was split roughly 3/1 between all early-stage deals vs later-stage investments.
• Venture investment reached startups in all 50 states, the District of Columbia, Puerto Rico, 251 metropolitan statistical areas (MSAs), and 414 congressional districts.

NVCA in Action in 2022

• Policy: NVCA spent considerable time working with policymakers to invest in the nation’s infrastructure and competitiveness through engagement on the CHIPS and Science Act and the Inflation Reduction Act (IRA) while also allocating significant time and resources to prevent a variety of counterproductive tax and regulatory threats.
• Programs: NVCA and its 501(c)(3) supporting organization, Venture Forward, delivered strong virtual and in-person programming to support the VC ecosystem from coast to coast, including launching the Venture Capitol podcast, the 2022 VC Awards Ceremony, the Strategic Operations & Policy Summit, the Board Service Excellence Forum, VC University ONLINE, VC University LIVE, LP Office Hours, the Strategic Communications Group Summit, and several virtual “Spotlight On” series highlighting emerging VC ecosystems across the country.
• Research: NVCA welcomed Research Director Shiloh Tillemann-Dick and launched the 2022 VC Human Capital Survey with outreach to 2,500 active U.S.-based VC firms (along with Venture Forward and Deloitte).

Download the NVCA 2023 Yearbook HERE. Access the public supplemental PDF data pack HERE. NVCA members may access the members-only supplemental XLS data pack by contacting research@nvca.org.

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The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the U.S. venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about the NVCA, please visit www.nvca.org.