VC FUNDING TRENDS JUNE '22
The world of Venture Capital (VC) isn’t catching a break. Compared to last month, the total capital raised in June decreased by 21%. Companies are still raising money, but the average deal size has gotten smaller as recession anxiety sets in.
This past month was a tough one for the fintech space, which shrunk by nearly 2x compared to last month. Layoffs are continuing across all industries, mortgage rates are at 2008 levels and there’s a misery index confirming that US households are hurting.
Below are our observations for June 2022, including year-on-year and month-to-month comparisons as well as leading industries and companies most deserving of attention.
General Overview
This June, the total?number of companies that raised funding was 1,236, compared to 1,053 in June of last year. This is a 17% year-on-year increase. The?total funding raised was $26.3 billion, with a 21% year-on-year decrease; last year, June clocked in at $33.42 billion.
Leading Countries
*based on the number of companies that raised funding (not total funding)
1. USA?— with?641?companies?(20% year-on-year increase),?$15.99B?in cumulative investment (18% year-on-year decrease) and a median deal size of?$7.2M?(37% year-on-year decrease)
2. UK?— with?95?companies?(5% year-on-year decrease),?$2.03B?in cumulative investment (30% year-on-year decrease) and a median deal size of?$5.02M?(33% year-on-year increase)
3. India?— with?77?companies?(88% year-on-year increase),?$840M?in cumulative investment (127% year-on-year increase) and a median deal size of?$4M?(74% year-on-year increase)
4. Canada?—?(up one spot)?with?59 companies?(97% year-on-year increase),?$720M?in cumulative investment (21% year-on-year decrease) and a median deal size of?$3.02M?(76% year-on-year decrease)
5. Israel?—?(new to list)?with?45 companies?(32% year-on-year increase),?$1.07B?in cumulative investment (27% year-on-year decrease) and a median deal size of?$15M?(5% year-on-year increase)
Conclusion:?Fewer companies are getting access to investment capital — 11% less than last month. The total capital raised in June has subsequently decreased by 21%. More companies have raised capital compared to last year but the average deal size has gotten smaller. Israel has joined the ranking, taking Germany’s slot.
Leading Industries
1. Fintech
135 companies?accumulated?$3.99B in investment, an 11% year-on-year decrease.
The top 3 biggest funding rounds are attributed to?Optcapital?(financial services company specializing in deferred and incentive compensation) -?$585.4M?(total funding: $912M),?StrideUp?(digital home fintech that provides shared ownership mortgage plans) -?$343.6M?(total funding: $345.7M)?and?Settle?(fintech platform that automates B2B payments and provides working-capital solutions for businesses) -?$280M?(total funding: $376M).
2. Biotechnology
119 companies?accumulated?$3.39B in investment, a 20% year-on-year increase.
The top 3 biggest funding rounds are attributed to?Xenon Pharmaceuticals?(biopharmaceutical company focused on the development of novel medicines via a proprietary discovery platform)-?$287.5M?(total funding: $942.6M),?DBV Technologies?(clinical-stage biopharmaceutical organization) -?$192.2M?(total funding: $243.3M)?and?Day One Biopharmaceuticals?(biotech company focusing on developing new cancer therapies) -?$172.5M?(total funding: $362.5M).
3. AI
110 companies?accumulated?$1.92B in investment, with no year-on-year change.
The top 3 biggest funding rounds are attributed to?Zoovu?(AI content discovery platform) -?$169M?(total funding: $183M),?Ataccama?(AI-powered enterprise platform for data and metadata) -?$150M?(total funding: $150.5M)?and?Coralogix?(SaaS platform using ML algorithms to facilitate delivery and maintenance processes for software providers) -?$142M?(total funding: $238.2M).
4. Healthcare
85 companies?accumulated?$953M in investment, a 31% year-on-year decrease.
The top 3 biggest funding rounds are attributed to?Capital Rx?(wellbeing innovation organization that helps oversee drug store benefit plans) -?$106M?(total funding: $203M),?Diabeloop?(clinical gadget organization for diabetes and shut circle framework) -?$75.3M?(total funding: $129M)?and?Tomorrow Health?(tech-driven home healthcare company that focuses on the way home-based care is ordered, delivered and paid for) -?$60M?(total funding: $92.5M).
5. Ecommerce
84 companies?accumulated?$1.7B in investment, a 5% year-on-year increase.
The top 3 biggest funding rounds are attributed to?Razor Group?(global consumer holding company that partners with ecommerce merchants to acquire and scale brands) -?$400M?(total funding: $959.8M),?Rohlik?(grocery delivery company that offers a 90-minute same-day delivery service) -?$231.5M?(total funding: $611.2M)?and?Magic Eden?(NFT marketplace for users to discover, trade and create NFTs) -?$130M?(total funding: $159.5M).
Conclusion:?The capital raised in the fintech space shrunk by nearly 2x compared to last month. Biotechnology is gaining momentum moving, from 4th to 2nd place this month with +$1B in total funding vs. last month.
Monthly Highlights
Measurable, Verified Misery
If you’re wondering how things are going with the global economy, here’s a recap:?not great.
Key stock market indexes like The Dow Jones Industrial Average, the tech-heavy Nasdaq Composite and the S&P 500?had their worst week?since 2020, symbolizing our official entry into?bear market territory.
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Inflation has hit 8.6% in the US and 8.1% in Europe. Money ownership is getting more expensive by the minute. Mortgage rates?are at their highest since 2008?and interest rates are going up, with the Fed recently announcing?the largest interest rate spike since 1994. Attempts at fighting inflation by slowing down the economy don’t look promising.
Practically everything is amplifying concerns about an?impending recession. The chances of one taking place by?Q1 2024 are at 71.7%. The?misery index?— an aptly-named summary of inflation and unemployment rates measuring American households’ economic well-being — is rising. And the higher it gets, the bigger the misery. So that’s neat.
Taking the ‘Fun’ Out of Funding
All of the numbers above have very real consequences — just ask?the tech space. There was a?23% drop in VC deal activity?between Q1 and Q2 2022, a significant shift from the humble 1.4% drop between Q4 2021 and Q1 2022.
Andreessen Horowitz’s analysis indicates that the?revenue forecast of public software companies is down by 60%, with fintech and consumer internet companies being down 70–80%. Since this represents a big risk for investments, VC funds will struggle with raising money to invest — making it?difficult for founders to raise capital.
As a result, Fidelity Investments?marked down?the valuations of Stripe, Reddit and ByteDance. Other consequences include:
Layoffs: The Sequel
Possibly the worst trend of 2022 continues as massive layoffs hit more and more companies.
Could All of This Make Sense?
Let’s look at things from a different perspective. Salesforce is enjoying a healthy?24% quarterly revenue increase?and the CEO of Binance.US told employees that?the company is growing faster than ever. In fact, according to?TechCrunch, startup layoffs are increasing at a slower pace compared to early 2020 pandemic days.
The VC slowdown feels more striking mainly due to last year’s record-breaking performance, and the stock market had been hitting historical valuations. So maybe we’re just thrashing around between extremes until we finally chillax on neutral ground.
Daily Dose of NFT Mayhem
You’ve seen the onslaught of “crypto market crash” news. Weekly NFT sales have?declined by over 70%, going from one million units to a quarter-million since peaking in early 2022.
Bitcoin prices?dropped to below $23k, its lowest point since 2020, which inevitably caused a massive?value drop of Etherium. The value of the global crypto market?went below $1 trillion?this month for the first time since January 2021.
Still, this hasn’t stopped tech giants from adopting NFTs on their platforms — perhaps because crypto remains the?highest funded fintech market of Q1 2022.
Meta has started using?Facebook to test NFTs?with select US creators following the May announcement that they’ll be doing so?on Instagram. The company now also?sells digital outfits?from designers like Prada and Balenciaga for metaverse avatars.
Microsoft, Meta, Adobe, Nvidia, Ikea and Epic Games are among?30+ companies to join the Metaverse Standards Forum?to establish standards for metaverse tech and develop new tools. The?absence of Apple?here indicates that the company isn’t fully on board the hype train just yet.
Definitely getting comfy on the hype train are eBay, which acquired?NFT marketplace KnownOrigin, and Shopify, which?launched Tokengated commerce?as a way to reward VIPs.
As always, it’s?a mixed bag. To the left, you’ll see investors expecting the?worst in the medium-term. To the right, Forbes reports a more?optimistic outlook for crypto’s future. And somewhere in the middle, New York is ruffling some crypto feathers after?passing a moratorium on Bitcoin mining.
Sentient AI? Sure, Why Not
With reports about?Google-developed AI coming to life, we figured we’d dive in and do some definitely-not-paranoid research about the space.
Pinterest announced it will?acquire The Yes, a shopping platform utilizing AI to allow users to shop personalized feeds. Cruise has?officially been permitted?to charge customers for?driverless taxi rides?in San Francisco on select streets, at night and during good weather.
In an effort to improve its audio tech game, Spotify is acquiring Sonantic, the?AI voice platform?that gave Val Kilmer a voice in the “Top Gun: Maverick” movie.
And finally, biotech startup Meta Pharmaceuticals (not that Meta)?raised $15 million?to develop new?autoimmune drugs?with the help of AI. If we were paranoid, robots choosing which pills we’ll be popping would be a bit daunting. But, again, we’re not paranoid. At all. Everything is fine.
Startups to Watch
($80.2M?in funding) Veo has designed a?camera and cloud-based subscription service?to record and automatically compile highlights of sports games. The video content can then be accessed and shared on Veo’s platform. Right now, the company is expanding its US operations and enhancing the scope of its technology.
($10.7M?in latest funding) A?wellness app?offering live wellness classes as a way of delivering a “personal trainer anywhere,” Buddyfit is currently furthering its international expansion plans and doubling its team’s size.
($5.5M?in latest funding) A?digital payment platform?that allows anyone to split payments for online purchases across multiple combinations of debit and credit cards, Kasheesh will use its funding to fuel hiring efforts alongside scaling its platform.
($3.5M?in latest funding) Ivella is a developer of?banking and financial apps?helping couples split their expenses. Its new capital will serve to fuel the company’s ongoing development.
($40M?in latest funding) The LA-based?soccer technology company?aims to disrupt and elevate the soccer experience through user-centered technology. Its new funds will be used to double the number of its facilities in the US and to open a site in the UK.