Q1’22 Venture Pulse Report – Global trends

During Q1’22, the diversity of jurisdictions attracting large funding rounds highlighted the growing breadth of VC markets outside of the US – although the US continued to attract the largest share of VC investment globally. Companies from eleven different countries raised $500 million+ funding rounds during the quarter, including the US (Altos Labs, Flexport, Ramp, Fireblocks, Eikon Therapeutics), France (Doctolib, Qonto, Back Market), India (Byju, Swiggy), China (JD Property, Changan New Energy), the UK (Checkout.com), Germany (Wefox), Estonia (Bolt), Turkey (Getir), Finland (Relex), Singapore (Princeton Digital), and Canada (1Password). The diversity of the largest funding rounds seen in Q1’22 extended beyond geography, reflecting a range of sectors from healthtech and energy to fintech, e-commerce, and cybersecurity.

While VC investment in Asia was relatively soft in Q1’22, VC investment remained quite strong in the Americas and Europe, with Europe showing particular strength despite the emergent Russia-Ukraine war.

Globally, IPO activity slowed considerably in Q1’22, as capital markets experienced significant volatility in the wake of the Russia-Ukraine war. After wanning in the second half of 2021, interest in SPAC transactions disappeared almost entirely in Q1’22, with an increase in SPAC investors not agreeing to proposed terms for SPAC-mergers.

All major capital markets were affected by stock market volatility, with the HKSE market index dropping to the lowest level seen in five years4. Technology company stocks were hit particularly hard – which likely drove technology startups considering early 2022 IPO exits to rethink their exit plans. While the closure of the IPO window could drive interest back to traditional M&A, the downward pressure on valuations could mean companies taking a wait-and-see approach with the hope that valuations bounce back.

After growing in 2021, VC investment in cybersecurity surged further in Q1’22, led by a $650 million raise by Canada-based 1Password. Cyberattacks have grown significantly in most regions of the world, with attacks increasingly targeting not only governments and global organisations, but also small and mid-sised companies. The types of threats have also expanded considerably, from more complex and advanced forms of business disruption to the rapid spread of misinformation. In a world where many organisations are embracing digital and the cloud, the vulnerabilities will likely continue to evolve. This will likely keep VC investment in the space quite high for the foreseeable future.

There is a significant level of uncertainty permeating the globe at the moment driven by a number of different factors. This makes it difficult to predict how the VC market will respond over the long-term. Given the significant amount of dry powder available in the market, however, VC investment is expected to remain relatively steady heading into Q2’22. Deal speed, however, could slow as VC investors conduct more due diligence related to potential deals. VC investors will likely also renew their focus on late-stage deals, which could create challenges for startups looking to attract seed and early-stage investments.

In Q2’22 global VC investors will likely also be keeping a close watch on the capital markets. Should the level of volatility continue and the IPO window remain shut, companies could reconsider their exit plans and strategies.