Global venture capital investments rose 5.4% to $368.5 billion in 2024, but deals fell 17% | NFCA/BitchBook

worldwide Venture capital investments To $368.5 billion in 2024, an increase of 5.4% from $349.4 billion the previous year, according to a first look at the report. Q4 2024 Pitchbook-NVCA Venture Monitor a report.

But the number of global deals in 2024 fell 17% to 35,686 from 43,320 the previous year in 2023. AI deals rose as a percentage of all deals for the year, as you can see in the chart below.

Global deals for 2024 were down 50.9% from $751.5 billion in the peak year of 2021, and down 37% from 57,068 deals in 2021.

AI deals are a big part of the picture now. There were 8,343 global AI deals in 2024, down 3.6% from 8,661 in 2023, and down 16.6% from 10,007 in 2021.

The value of those global AI deals in 2024 was $131.5 billion, up from 52% of $86.3 billion in 2023 and down 6% from $140.2 billion in 2021.

Artificial intelligence and machine learning accounted for 35.7% of the number of global deals in 2024, up from 24.7% in 2023. Artificial intelligence and machine learning accounted for 23.4% of the number of global deals in 2024, up from 20% in 2023. In 2021, AI reached 18.7%. % of the value of global deals and 17.5% of the number of global deals.

Global Q4 numbers

Globally in Q4, the venture market in the Asia-Pacific region has struggled over the past few years, something that won’t change in 2024, said Kyle Stanford, senior venture capital analyst at Pitchbook.

Compared with Europe and the United States, the amount of dry powder accumulated in various markets across the Asia-Pacific region has been much lower, which has increased deal-making pressure over the past year. China, which drove about half of the Asia-Pacific region’s annual deal activity, has seen a significant decline in activity, due to economic challenges within the country, as well as tensions with the US government, which has reduced activity for companies headquartered in the US. Companies. Only 20.4% of the number of deals were executed in Asia, the lowest percentage in the past decade.

Globally, AI has continued to dominate headlines and investors’ investment focus despite some indicating that investment activity is unsustainable in the long term. Whether this is true or not is a trivial matter at the moment.

Just over half of all venture capital invested globally during the fourth quarter went to an AI-focused company. It is true that this amount has been heavily influenced by the likes of OpenAI, Databricks, xAI and other well-known companies that have collected stock buybacks, investment in chips and computing power needs, but the more important factors are the level of availability of capital for artificial intelligence compared with other sectors, Stanford said.

He said the proportion of total deals going to AI companies has steadily increased over the past two years as large companies and investors alike move to harness the expected efficiencies of the coming technology wave.

“Venture capital-backed exits have not historically been strong for the Asia-Pacific region, although many markets are still too small to develop a healthy exit environment,” he said. “The lack of exits in many regions has made many foreign investors wary of increased activity during a market slowdown. Japan has been an outlier in terms of numbers, with several in-country IPOs helping boost returns for investors. In 2024, 19% of global venture capital-backed exits originated in Asia-based companies.

Fundraising was slow globally, with new commitments down just over 20% year-on-year. The lack of exits had a significant impact on fundraising for Asia as limited partners were less inclined to renew commitments at this time. 2024 was the lowest year for new commitments since 2018, and the lowest year for closed-end funds in the market over the past decade. Likewise, North America and Europe struggled to secure new venture fund commitments.

US Deals Q4

U.S. dealmaking remained relatively strong in Q4 2024 from a count perspective, and increased slightly by 3.7% compared to the previous year, Pitchbook and NVCA said. This quarter, AI deals accounted for nearly half (46.4%) of total US deal value.

This seems counterintuitive to the prevailing narrative in the market over the past few years, but is indicative of the retention of certain venture mechanics from a few years ago, Stanford said.

“What happened is that the surplus of dry powder from the high fundraising years of 2021 and 2022 kept many investors active in the market despite the lack of returns,” Stanford said. “With fundraising slow in 2023 and 2024, we will likely see this relative strength begin to deteriorate as funds run down their available capital and are unable to raise subsequent funds.”

He said AI is still the story of the market, and has raised almost the majority of venture capital dollars in 2024. OpenAI, xAI, Anthropic and others have become synonymous with mega-venture deals, and appear to operate in a different funding environment than most venture capital-backed companies, Stanford said. Which continues to suffer from low capital availability.

But he said the lack of exits remains the story of the venture market, even as the outlook is more optimistic. Just $149.2 billion in exit value was generated through 2024, coming largely from a handful of IPOs. Unicorns, which hold about two-thirds of the U.S. venture capital market capitalization, have held on as private companies, creating pressure on investors and limited partners as distributions decrease.

Mergers and acquisitions were also “muted in 2024,” with few large deals noted, Stanford said. A more takeover-friendly environment in 2025 could pave the way for a renewed market for mergers and acquisitions, especially if a soft landing for the economy can be fully engineered, he said.

In the United States, large, well-established companies dominated the fundraising process. Thirty companies accounted for more than 68% of the total fundraising value in 2024. This trend has developed over the past few years, but came to the fore last year, Stanford said.

Many emerging managers who raised money during the venture capital market’s ZIRP-era boom were unable to generate returns, and their portfolios were turbulent due to valuation changes that occurred during the market shift. Without a track record to speak to, many companies find a very difficult market to raise new commitments from limited companies, Stanford said.

European venture capital market

In Europe, the value of venture capital deals reflected a slight decline, while the number of deals fell by about 16% compared to last year, as a more cautious environment emerges in 2024, Pitchbook analyst Nalin Patel said.

European deal activity declined across previous financing stages, the majority of sectors, and many regions, as the financing market was tighter.

He said AI drove just over a quarter of deal value to the region during 2024, on just over 23% of completed financings. Large mega deals attributed to other enterprise markets have not occurred to the same extent in Europe, keeping the ratio of deal value to number in line.

The value of exits rose in 2024, largely driven by the listing of Puif, he said. Otherwise, it was a quiet year for European venture capital-backed exits, particularly on the listing front as companies avoided exits.

“We expect exits to rise in 2025 as market conditions improve,” Patel said.

Capital raised by European venture capital funds was flat year-on-year in 2024 and remained below the peak in 2022. Fund numbers also fell in 2024 by almost a fifth compared to 2023. The decline in fund numbers and fixed capital figures indicates Fewer, but larger funds will close in 2024.

Future outlook?

One way to tell how much dry powder an industry has and whether venture capital firms are successful is to look at how successful they are at raising money themselves. This is where the news looks a bit bleak, or at least corrected now compared to the busy days of 2021.

In 2024, 1,344 funds raised capital, down from 2,333 in 2023, and a record 4,283 in 2021. In terms of capital raised, 1,344 venture funds raised $169.7 billion in 2024, down from $213.8 billion in 2023 and down from the record high of $404.4 billion in 2021. .