PitchBook: VCs invested ~$16B in US Series A and B rounds in Q2 2022, down 22% YoY, the biggest decline in early-stage funding since 2010, excluding Q2 2020
Berber Jin / Wall Street Journal :
Context & Ripple Effects
This PitchBook datapoint landed a week after CB Insights measured a 23% quarter-over-quarter drop in global VC activity between Q1 and Q2 2022 — but it matters more, because Series A and B rounds are where the downturn reaches companies too young to have raised at 2021's peak valuations.
What followed confirmed it was a cycle, not a blip: VC firms raised just $20.6B in new funds in Q4 2022, down 65% YoY, and by year-end 2023 US investment had fallen to its lowest level since 2019 per PitchBook's annual tally.
First-order effects
- Series A and B founders raising in H2 2022 face the tightest early-stage market in over a decade, with VCs repricing rounds against the 22% YoY drop rather than 2021 comparables.
- Early-stage-focused funds see their deal pipelines thin immediately, since the $16B quarterly total leaves less room for new commitments while existing portfolio companies consume follow-on capital.
Second-order effects
- LPs respond to deteriorating early-stage marks by cutting new fund commitments — the pattern Preqin captured when Q4 2022 fundraising hit its lowest Q4 level since 2013 across just 226 funds.
- Seed and angel activity contracts as the A/B squeeze cascades down the funnel, leaving fewer companies positioned to raise their next round at all.
Third-order effects
- The contraction compounds structurally: with US VCs returning only $26B to investors in 2023 — the least since 2011 per PitchBook — and Q3 2024 deal volume still falling 32% QoQ because exits remain scarce, the industry is deploying far more than it collects, extending the reset well beyond a single bad quarter.
The trend: Venture capital moved from peak-cycle deployment into a multi-year contraction in which scarce exits suppress both fund returns and new early-stage deal-making.