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Global venture capital investment will rise to $368.5 billion in 2024, an increase of 5.4% from $349.4 billion in the same period last year, a first look at global venture capital has revealed. Q4 2024 Pitch Book – NVCA Venture Monitor Report.
However, the number of global transactions in 2024 was 35,686, down 17% from 43,320 in 2023. As you can see from the graph below, the share of AI trades in total trades increased over the year.
The number of global deals in 2024 was down 50.9% from the peak of $751.5 billion in 2021, and down 37% from the 57,068 deals in 2021.
AI trading is now a big part of the picture. There were 8,343 global AI transactions in 2024, down 3.6% from 8,661 in 2023 and 16.6% from 10,007 in 2021.
The value of these global AI deals in 2024 was $131.5 billion, up 52% from $86.3 billion in 2023 and down 6% from $140.2 billion in 2021.
AI and machine learning will account for 35.7% of global transaction value in 2024, up from 24.7% in 2023. Additionally, AI and machine learning will account for 23.4% of global transaction value in 2024, up from 20% in 2023. In 2021, AI was 18.7%. % of global transactions, 17.5% of global transactions.
Global numbers for the fourth quarter
On a global level in the fourth quarter, the Asia-Pacific venture market has struggled in recent years, and that will continue to be the case in 2024, said Kyle Stanford, lead VC analyst at Pitchbook. Ta.
Compared to Europe and the US, the amount of dry powder accumulated within various markets in APAC was much lower, putting further pressure on deal-making over the past year. China has driven about half of the Asia-Pacific region’s annual trade activity, but activity has slowed significantly due to both domestic economic challenges and tensions with the U.S. government, which has curbed the activities of U.S.-based companies. has decreased to companies. Asia accounted for just 20.4% of deals, the lowest percentage in a decade.
Globally, AI continues to dominate investor headlines and investment focus, even though some argue that investment activity is not sustainable in the long term. Whether that’s true or not is trivial at this point.
Of all VC investments globally in Q4, just over half went to AI-focused companies. Granted, that amount was heavily influenced by OpenAI, Databricks, xAI, and other big-name companies raising money for stock buybacks and investments in chips and computing’s energy needs. The most important factor is the level of capital available to AI compared. Stanford said it’s similar to other sectors.
The percentage of total trades traded by AI companies has consistently increased over the past few years, he said, as large companies and investors alike seek to take advantage of the efficiencies expected in the next wave of technology. Ta.
“While VC-backed exits have historically been less active in the Asia-Pacific region, many markets are still too young to create a healthy exit environment,” he said. “With a lack of exits in many regions, many foreign investors are weary of increased activity during market downturns.Many domestic IPOs have contributed to increased returns to investors. In 2024, 19% of venture capital-backed exits worldwide will come from companies based in Asia.”
Funding has lagged globally as new commitments fell by more than 20% year-on-year. LPs are currently less likely to re-commit, and the lack of exits is having a significant impact on Asian funding. 2024 was the lowest year for new commitments since 2018, and the lowest number of funds closed on the market in a decade. North America and Europe similarly struggled to attract new venture funding commitments.
US Q4 trading
From an aggregate perspective, U.S. dealmaking remained relatively strong in the fourth quarter of 2024, increasing slightly by 3.7% year over year, according to Pitchbook and NVCA. In the quarter, AI trading accounted for nearly half (46.4%) of total U.S. trading.
Stanford said this seems counterintuitive to the market narrative of the past few years, but it shows that certain workings of ventures from years ago remain.
“What happened was that there was an oversupply of dry powder during the high funding period of 2021 and 2022, so many investors remained active in the market, even though they were not making profits. “We have continued to operate,” Stanford University said. “This relative strength is likely to start to deteriorate in 2023 and 2024 as funding slows and funds run out of available capital and are unable to raise another round.”
Artificial intelligence continues to be a hot topic in the market, moving almost the majority of VC dollars in 2024, he said. OpenAI, xAI, Anthropic, and others have become synonymous with large venture deals and appear to operate in a different funding environment than most VC-backed companies, which continue to suffer from low capital availability. said Stanford.
But even as the outlook becomes more hopeful, a lack of exits remains the story of the venture market, he said. Exit value generated in 2024 was only $149.2 billion, most of which came from a small number of IPOs. Unicorns, which hold about two-thirds of the value of the U.S. VC market, remain firmly privately held, putting pressure on investors and limited partners with a lack of distributions.
Mergers and acquisitions were also “quiet in 2024,” with few notable large deals, according to Stanford University. He said a takeover-friendly environment could set the stage for a new M&A market in 2025, especially if a soft economic landing can be fully planned.
In the United States, financing was dominated by existing large corporations. According to Stanford University, 30 companies accounted for more than 68% of total funding in 2024. The trend has been developing over the past few years, but reached the forefront last year.
Many of the emerging managers who raised money during the ZIRP-era VC boom have failed to make a profit, and their portfolios have suffered from valuation changes that have occurred as the market has changed. Stanford said many companies are finding it a very difficult market to get new deals from LPs because they don’t have a track record to speak of.
European VC market
Pitchbook analyst Nalin Patel sees a more cautious environment in 2024, with deal numbers down around 16% year-on-year in Europe, reflecting a slight decline in VC deal value. said.
Deal activity in Europe was weak in early funding stages, across most industries, and in some regions, as funding markets were clearly challenging.
He said AI will bring just over a quarter of deal value to the region in 2024 and just over 23% of completed financings. The large, oversized deals originating from other venture markets did not materialize in Europe at the same value, and the proportion of deal values matched the number of deals.
He also said that the exit value increased in 2024, mainly due to the listing of Puif. Otherwise, it was a quiet year for venture capital-backed exits in Europe, particularly on the listing front, as companies avoided exits.
“We expect exits to increase in 2025 as market conditions improve,” Patel said.
Funding by European-based VC funds was flat year-on-year in 2024 and below its 2022 peak. Additionally, the number of funds in 2024 has decreased by approximately one-fifth compared to 2023. The decline in the number of funds and flat funding amounts indicate a decline, but larger funds will close in 2024.
What’s the outlook?
One way to find out how much dry powder the industry has and whether the VCs themselves are successful is to look at how well the VCs themselves have done in raising capital. That’s where this news looks pretty bleak, at least compared to the over-hyped days of 2021, which has now corrected.
In 2024, 1,344 funds raised capital, down from 2,333 in 2023 and a record high of 4,283 in 2021. In terms of funds raised, 1,344 VCs raised $169.7 billion in 2024, down from $213.8 billion in 2023 and down from the all-time high of $404.4 billion in 2021. .
