PitchBook Research reports that Q3’s data points to an increasingly difficult environment to raise capital, especially for more mature companies. Capital availability at both the early and late stages has fallen quickly to some of the lowest levels we’ve seen in recent years.
For every dollar expected to be sought, there are now just six dollars available for each stage. In 2021, this ratio reached double digits. The question of where the capital has gone is important context.PitchBook Research indicates that the dollar declines seem to have largely come from crossover and other nontraditional investors, exacerbating the challenges for companies that had ridden the wave of extending multiples into high valuations that will be unsupported in today’s environment.
Deal value derived from financings with crossover investor involvement fell to under $12 billion in Q3, $33 billion lower than the highest quarter. Just $20 billion in mega-deals were completed in Q3 – well below the record $54 billion. In addition, roughly 90 percent of these transactions include nontraditional investors, such as large crossover institutions with much larger capital bases than venture capital firms.