According to the “Venture Pulse” report published by KPMG, in the environment of uncertainty caused by the war in Ukraine, high inflation and rising interest rates, investments in global ventures decreased in the second quarter of 2022. Considering the number of geopolitical and macroeconomic uncertainties in the report, it is predicted that the current uncertainty will continue in the third quarter.
KPMG examined global venture investments in the second quarter of 2022 in its “Venture Pulse” report. Global venture investment has dwindled due to factors such as continued geopolitical uncertainties, supply chain issues, and rising inflation and interest rates, according to the quarterly report, which highlights the major trends, challenges and opportunities facing the entrepreneurial world worldwide.
Global venture investments, which reached $2021 billion in the last quarter of 207, declined to $165 billion in the first quarter of this year, and continued to decline in the second quarter, down to $120 billion. Although the amount of investment in America, Europe and Asia decreased in the second quarter, the entrepreneurship world of the USA, where three deals worth more than 1 billion dollars were made, once again showed its resilience. US-based Epic Games received $2 billion, SpaceX $1,7 billion and GoPuff $1,5 billion. The largest investment outside the USA was 1,15 billion dollars, which was received by Germany-based Trade Republic. This was followed by India-based Dailyhunt's $805 million, United Arab Emirates-based Kitopiin's $714 million and Switzerland-based Climeworks' $650 million investment.
Evaluating the report, Gökhan Kaçmaz, Partner of KPMG Turkey Mergers and Acquisitions Consultancy; “With geopolitical uncertainties and the decline in volume and number of transactions in the global VC market, tech companies are going through a tough time. The decline in valuations and the weak performance of technology companies in the markets caused a slowdown in public offering activities in the second quarter. We observe that investors instruct their portfolio companies to protect their cash. There is a similar outlook for the third quarter of 2022, profitability is critical for startups.”
Despite having cash reserves, global venture investors are more cautious
Globally, although there are reasonable cash reserves in the venture capital markets, especially in the USA and Europe, cautious investors focus more on companies in their portfolios, ventures that are making strong progress towards profitability, and companies operating in sectors that have started to attract attention with the crisis in Ukraine. Venture investors are putting pressure on portfolio companies to protect their cash to avoid the storm. A number of highly valued private companies saw their valuations fall in Q2022 2 compared to 6 months ago. Many publicly traded technology companies around the world have experienced similar declines. This has caused some global investment firms to shrink their investment budgets, be more selective in their recruitment plans and organize their workforces rationally in order to manage the companies in their portfolios in order to avoid the current uncertainties. Many venture investors and startups are delaying new funding rounds, choosing to stay in cash until the turbulence in the market passes.
Supply chain and automation continues to draw attention
Investor interest in consumer-oriented businesses declined in the second quarter of 2022, while interest in many sectors remained relatively high. The supply chain and logistics industry has also received significant attention as companies look for ways to address the ongoing supply chain challenge. Another area of interest for venture investors focusing on supply chain management was automation. Investors have shown an interest in the development of automated vehicles to be used not only in long-distance transport, but also in warehouses, farms, and industrial or manufacturing facilities. Drone technologies likewise remained on the radar of venture investors.
Rising energy prices increase interest in alternative energy
Rapidly rising energy prices in many parts of the world and growing concerns about energy dependence further increased investor interest in alternative energy options, energy storage and mobility in the second quarter. Electric vehicles and batteries continued to be the main focus for investors during the second quarter, while areas such as hydrogen-based technologies also attracted interest. Over the next few quarters, increased interest in other energy sources and solutions is also expected, such as the development of small-scale nuclear power plants in Europe.
Some startups' unicorn status is compromised
In the second quarter, 97 new unicorn startups were born globally. More than a third of these unicorn startups were fintech companies. While more than half of Unicorn startups are located in the US, almost all of these startups are US-based. Only three startups are based in Latin America, namely Unico and Stark Bank in Brazil and Kushkiin in Ecuador. In Europe, a total of 8 new unicorns came out from 18 different countries. These countries are England, Germany, Finland, Sweden, Norway, Netherlands, Switzerland and Israel. 17 new unicorns also emerged from seven countries in Asia. While the number of new unicorns remained stable in the second quarter compared to previous periods, decreasing investment rounds brought along concerns that 2 billion dollar unicorn startups may lose their status. For this reason, it is considered that unicorn startups worth 1 billion dollars can make significant concessions to investors in order to maintain their status.
Trends to be followed in the 2022rd quarter of 3
The report states that, given the number of geopolitical and macroeconomic uncertainties affecting the entrepreneurial world globally, downward pressure on valuations will continue, which could lead to lower investment levels. It is also noted that venture investment deals in many regions will likely take longer to complete, as investors will place more emphasis on due diligence on deals. On the other hand, it is also mentioned that the fintech sector will probably continue to be a strong investment area in many regions of the world, in addition to supply chain and logistics, cyber security and alternative energy. But given rising inflation and interest rates, consumer-focused companies are likely to lose some interest in the eyes of venture investors.
Top 2022 global financing in the second quarter of 2
- Epic Games – $2 Billion – USA – Entertainment Software
- SpaceX – $1,7 Billion – USA – Aviation
- Gopuff – $1,5 Billion – USA – Internet Retailing
- Trade Republic – $1,15 Billion – Germany – Fintech
- Faire – $816 Million – USA – E-commerce
- Dailyhunt – $805M – India – Consumer
- Ramp – $748,3M – USA – Fintech
- Kitopi – $715 Million – United Arab Emirates – Food Technology
- The Boring Company – $675 Million – USA – Infrastructure
- CanSemi – $671,8 Million – China – Manufacturing