CB Insights: global VC activity dropped 23% between Q1 and Q2 2022 through June 23, after dropping just 1.4% between Q4 2021 and Q1 2022
Venture capital-backed startups raised far fewer rounds of funding during the past three months than they did during the more ebullient days of late …
Context & Ripple Effects
The headline number here is the acceleration, not the level: global VC activity fell just 1.4% between Q4 2021 and Q1 2022, then dropped 23% between Q1 and Q2 2022 through June 23 on CB Insights' count — the steepest sequential contraction in this coverage arc. The closest precedent in the corpus is the pandemic onset, when worldwide VC was projected at $63.8B for Q1 2020, down 17% from the previous quarter — a shallower dip than what mid-2022 delivered.
What makes the June print matter is that it arrived before the quarter even closed, and the full-quarter data confirmed it was no blip: global VC funding landed at $81B in Q3 2022, down 53% year over year and the lowest since Q1 2020. This article is the early-warning datapoint for the multi-year drawdown that followed.
First-order effects
- Startups raising rounds in Q2 2022 faced a market contracting at more than 16 times the pace of the prior quarter, with CB Insights' partial-quarter tally signaling to founders and fund managers that the window was closing mid-round.
- Late-stage companies were positioned to absorb the worst of it — the pattern that showed up months later when late-stage funding fell 73% in February 2023, the deepest decline of any stage.
Second-order effects
- Deal-count dynamics reasserted themselves over dollar totals: as in 2016, when funding rose 3% on mega deals while deal volume hit a three-year low, the 2022 pullback concentrated capital in fewer, larger rounds and squeezed the long tail of smaller financings.
- The compression cascaded down the funding ladder — by Q2 2023, US angel and seed deal counts had fallen roughly 50% year over year alongside the broader $39.8B US total, down about half — leaving early-stage founders with the thinnest fundraising market in the cycle.
Third-order effects
- If the pattern holds, downturns become sector-differentiated rather than uniform: fintech illustrates the tail end, where investment fell to $7.3B in Q1 2024, the sector's lowest since 2017 — two years after the broad market bottomed.
- Structurally, the corpus points toward a lower baseline for venture deployment: each successive trough ($70.6B in Q1 2020, $81B in Q3 2022, sub-$20B monthly prints in early 2023) resets expectations for what 'normal' quarterly funding looks like, extending raise timelines and pushing startups toward profitability over growth-at-all-costs.
The trend: Venture capital moved from the 2021 peak into a multi-year contraction cycle, with the mid-2022 acceleration marking the point where a soft landing became a sustained drawdown.