2022 Q2 Private Markets Report

An article we liked from Thought Leader Lian Chang of Carta:

State of Private Markets: Q2 2022

Venture capital is in a slowdown, but not a freefall.

For the past two quarters, the number of rounds and the amount of cash raised on the Carta platform both declined, deepening the downturn in venture investment. However, the decline in Q2 wasn’t as steep as it was in Q1. Whereas Q1 saw a 27% drop in the number of rounds and a 36% decline in cash from the previous quarter, the Q2 declines were 13% and 29%, respectively. As companies continue to document their second-quarter deals on Carta, revised data will likely show slightly smaller Q2 declines.

While venture activity in the first half of 2022 was slower than it was last year, it’s on pace to exceed annual totals in 2020 and earlier years.

Q2 highlights

• Series D saw the steepest drop in total cash. Cash going to Series D rounds dropped by 48% from Q1 to Q2, while Series C saw a drop of just 4%.
• Bridge rounds became more common at later stages. As companies navigate market conditions that remain unfavorable for IPOs and late-stage valuations, bridge rounds became nearly three times as common at Series E and beyond, comprising 22% of rounds in Q2 2022 versus 8% in Q1.
• Layoffs increased as voluntary employee departures declined. In both May and June, the number of employees who lost their jobs increased over the previous month, while the number of employees who chose to leave their jobs decreased, driving the percentage of employee terminations that were involuntary up to 37% in June.

These trends come as the U.S. stock market posted its worst first six months since 1970, with the tech-heavy NASDAQ composite dropping some 30%. Meanwhile, the Federal Reserve repeatedly raised interest rates to tame inflation, which reached a high of 9.1% in June. The higher cost of capital and decline in consumer spending power generated economic doubts that continue to register in the private markets.

Another quarter of contractions

Q1’s relative shift in cash away from later stages continued in Q2, which saw a smaller percentage of cash going to rounds at Series D and above than in any quarter since Q1 2020.

Seed, Series A, and Series C rounds each took larger pieces of a smaller pie in Q2, with the $28B in total cash recorded on Carta for Q2 down by 29% quarter over quarter (QoQ). The number of rounds decreased at every stage except Series C, which posted a QoQ increase of 9% in Q2.

Series C rounds also saw the smallest drop in total cash in Q2, raising just 4% less than in Q1. However, the percentage of cash that went to all late-stage (Series C and beyond) rounds taken together only changed from 46% in Q1 to... 

Read the rest of this article at carta.com...

Thanks for this article excerpt and its graphics to Lian Chang, Data Storyteller at Carta.

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