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October 18, 2023 | Tom Ballard

Venture capitalists raise just 25 percent of last year’s Q3 amount

PitchBook-NVCA Venture Monitor's latest outlook suggests investors are still searching for equilibrium in an economy in flux.”

The glitter has clearly disappeared, at least as it relates to U.S. venture capital (VC) funding after Q3 data was reported.

The latest edition of the PitchBook-NVCA Venture Monitor report noted that U.S. VCs raised just $42.7 billion through September 30, roughly 25 percent of last year’s record of $172.5 billion.

“From generative artificial intelligence (AI) to geopolitics, the number of effectively unprecedented factors impacting the market today means that investors are still searching for equilibrium in an economy that is in flux,” according to the report.

We asked several locally-based fund managers about their advice to those that they support.

“I am advising our funds to prepare for at least two to three more quarters of the same, assuming few changes to the macro-economic environment,” said Jim Hart, President and Chief Executive Officer (CEO) of Appalachian Investors Alliance. It is a nonprofit educational foundation providing technical services to community-minded angel investors and committed entrepreneurs.

Noting that this year’s investment numbers for the Sheltowee Angel Group were not much off last year’s pace, CEO Eric Dobson said, “The big difference this year was the majority of our funding went to existing portfolio companies. We are just now adding new companies to the list again.”

He cited the inflation rate going through the roof and the collapse of Silicon Valley Bank (SVB) as other contributing factors. “That (SVB) scared investors and entrepreneurs alike,” Dobson added. “I don’t have a crystal ball, but I think that the first quarter will see an intense competition for capital and be a buyer’s market. Existing portfolio companies will be taken care of first. New investments will be smaller and at lower valuations. Those raising capital should buckle up for a rough ride and be prepared to do more with less (yes, I know how difficult it already is). But, I think, as we get further and further from a recession that did not happen, optimism will return and we should see a good year for the balance of 2024.”

He added that the new State Small Business Credit Initiative (SSBCI) with nearly $117 million in federal funding, including $70 million in equity through “InvestTN,” should provide important leverage for those dollars that are currently sitting on the sidelines.

WRAL TechWire, one of our favorite sources, talked to several VCs that do business in the Tar Heel state and reported these reactions.

  • Scot Wingo, Founder of the Triangle Tweener Fund, said he’s telling start-ups to get ready for a challenging investment season.
  • Eva Doss, President and Chief Executive Officer of The Launch Place, noted that the majority of its investment activity was focused on “bridge rounds” of the existing portfolio companies.
  • On the positive side, David Gardner of Cofounders Capital is looking at these trends with what was described as “an eye on possibility.” He explained that “investing in a down market is often very lucrative,” a point that Dobson also made.

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