Global VC Funding Overview

In Q3 2023, global venture funding reached $73 billion, marking a slight QoQ increase, and a 15% YoY decline from Q3 2022. According to Crunchbase, this quarter stands as the second-lowest since the market downturn in 2022. Despite the overall decrease, late-stage funding exhibited a significant 10% YoY and 30% QoQ increase, fueled by strategic sectors such as semiconductors, AI, electric vehicles, and sustainability.

A noteworthy development occurred in September, marking a significant milestone as venture-backed tech companies went public for the first time in 18 months. This hints at a potential opening of the IPO markets for tech listings in 2024. Notable IPOs of Instacart and Klaviyo were observed, and anticipation surrounds upcoming listings of well-known names like Stripe, Chime, and Reddit, suggesting a potentially more robust liquidity environment in the near future.

Now, let's take a closer look at the European venture landscape, where there are signs of resilience and positive shifts amid the challenges:

• Deal Value: In alignment with global trends, Pitchbook indicates that European deal value for 2023 is anticipated to fall below 2022 levels, with a 49.1% decline in the first nine months compared to the same period in 2022. However, encouragingly, there are indications of a potential recovery, as deal value in Europe has been on the rise since Q1 2023, notably with a 5.9% increase in Q3 compared to Q2. Especially the early-stages appear to be more resilient.
• Sector and Regional Resilience: Despite challenges, certain sectors exhibit remarkable backing, such as CleanTech, BioTech and Mobility, according to Dealroom. Regions such as France & Benelux show significant resilience in activity through Q3 2023, and the UK & Ireland continue to lead, accounting for 33.2% of deal value in Europe during the first nine months of 2023.
• Exit Activity Challenges: While exit activity remains a challenge in the European ecosystem, recent notable exits, such as SAP's acquisition of LeanIX, provide glimpses of potential revival. Although 2023 is on track to be the most subdued for exit value since 2013, a catalyst for revival is anticipated from broader valuations and public listings.
• VC Fundraising Dynamics: Despite facing a challenging fundraising environment in Europe for 2023, with fundraising at half the level of 2022, totaling €13.9 billion over 91 fund vehicles in the first nine months, there is an encouraging uptick since H1 2023. Notably, the shift of capital towards more experienced managers is observed, showcasing their proven adaptability in response to market dynamics.

In summary, we are particularly optimistic about the exceptional opportunity presented by the current market environment. Our strong belief is that 2023 and 2024 will emerge as some of the most promising vintage years in the foreseeable future. While managers need to exercise increased discipline in executing their fund strategies, we are confident that with a meticulous selection of both established and emerging managers across diverse geographical locations and sectors, there exists the potential for extraordinary value creation. This strategic approach positions us to capitalize on the unique prospects that lie ahead in the evolving landscape of venture capital.

Through our open-ended evergreen VC fund of funds, investors can achieve diversification across multiple VC funds, vintage years, geographies, and strategies. This time-diversified approach helps us manage risk effectively and creates exposure to various outliers on an ongoing basis. If you're keen to learn more about our portfolio, upcoming allocations, or how we think about the current market environment creating some of the best-performing fund vintages, please reach out to ir@aqvc.com.