28th October 2024, Kathmandu
The global venture capital (VC) market witnessed a significant downturn in Q3’24, according to KPMG Private Enterprise’s latest Venture Pulse report.
Global Venture Capital Investment Drops 26%
The report outlines a considerable 26% decline in total VC investment, with figures dropping from $95.5 billion in Q2’24 to $70.1 billion in Q3’24—the lowest level seen in nearly seven years. Geopolitical tensions, seasonal investment lulls, and uncertainty surrounding the upcoming US election contributed to this downturn, affecting all major markets, particularly in the Americas, Asia, and Europe.
Key Trends and Numbers for Q3’24
Americas Lead in Investment But Also See Decline
While the Americas remained the largest regional contributor with $41.4 billion in VC investments, this figure was down from Q2’24’s $58.6 billion. The United States, which accounted for $37.5 billion of this, was driven by significant interest in AI and life sciences.
AI, in particular, saw the quarter’s only billion-dollar raises, including Anduril Industries’ $1.5 billion and Safe Superintelligence’s $1 billion funding rounds. In contrast, Canada achieved a ten-quarter high in investment, led by legal-tech firm Clio and AI-focused Cohere.
Asia-Pacific and Europe Trends
Investment in Asia dropped to a seven-year low, settling at $15.6 billion in Q3’24, with China contributing $6.1 billion—the region’s lowest in a decade.
India held steady, raising $3.6 billion, with notable contributions from consumer-focused startups. Japan, however, saw an investment surge to $1.8 billion, a twelve-quarter high, with increased activity driven by innovative companies like Sakana AI. In Europe, investment fell to $12.5 billion, the lowest since 2020. Germany was the sole outlier, increasing investment by 20% with defense-tech and aerospace companies leading the way.
The Role of Artificial Intelligence in VC Deals
AI continued to be a magnet for VC investments, with six of the top ten deals globally falling within this sector. Companies targeting niche industry solutions, such as defense tech and biotechnology, were particularly attractive to investors, reflecting a shift from core AI players to specialized applications.
Defense-tech saw robust funding, including Anduril Industries and Germany’s Helsing, reflecting rising global tensions and a growing focus on security innovation.
Exit Value and Fundraising Activity
The total global exit value dropped to a six-quarter low at $39.2 billion, with the US exit value taking a significant dip. Asian exit value, however, saw a recovery from $11.2 billion in Q2’24 to $18.2 billion in Q3’24. Global fundraising activity also lagged, with the total reaching only $143.1 billion by the end of Q3’24, far short of 2023’s $202.8 billion.
Looking Ahead to Q4’24 and 2025
As the market approaches Q4’24 with the looming US election and anticipated economic shifts, VC activity is likely to stay subdued. However, optimism persists, especially regarding IPOs and M&A activities, with interest rates expected to decline, potentially making acquisitions more viable in the coming quarters.
Conor Moore, KPMG’s Global Head of Private Enterprise, notes that “despite the decline, AI and defense-tech remain robust segments in VC, showing that investors are actively seeking high-value opportunities in specialized technology sectors.” As AI continues to dominate the spotlight, experts anticipate a strong start to 2025, with renewed interest in exits and IPOs post-election.
Conclusion
KPMG’s Venture Pulse Q3’24 report underscores a dynamic VC landscape in transition, where AI and targeted tech sectors are keeping interest alive amidst broader economic uncertainties.
The anticipated uptick in exits and a possible boost in IPO activity signal hope for a stronger global VC outlook in 2025, despite the current challenges.
For more: Global Venture Capital Investment Drops 26%