Chart of the Day: Venture Capital Funding Plumets – Why the Decline in Investing in the Future?

Contact Your Elected Officials
Right Wire Report Header

Venture capital (VC) is a form of private equity and a type of financing that investors provide to start-up companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks, and other financial institutions.

However, it does not always take a monetary form – it can also be provided in the form of technical or managerial expertise. Venture capital is typically allocated to small companies with exceptional growth potential or companies that have increased and appear poised to continue expanding.

For new companies or ventures with a limited operating history (under two years), venture capital is increasingly becoming a popular – even essential -source for raising money, especially if they lack access to capital markets, bank loans, or other debt instruments. Though it can be risky for investors who put up funds, the potential for above-average returns is an attractive payoff. The main downside is that the investors usually get equity in the company and, thus, a say in company decisions.

  • Venture capital financing is funding provided to companies and entrepreneurs. It can be provided at different stages of their evolution, although it often involves early and seed round funding.
  • Venture capital funds manage pooled investments in high-growth opportunities in start-ups and other early-stage firms and are typically only open to accredited investors.
  • Venture capital has evolved from a niche activity at the end of the Second World War into a sophisticated industry with multiple players that play an essential role in spurring innovation.

So what does the VC market look like today? Fundraising by VC firms plunged to a nine-year low in the fourth quarter as rising market volatility, geopolitical uncertainty, and higher inflation spooked investors, according to WSJ.

Preqin Ltd., a firm that tracks venture-fund data, released a new report that shows VCs raised a measly $20.6 billion in new funds in the fourth quarter. That was a whopping 65% decline compared with the quarter a year earlier and the lowest fourth-quarter amount since 2013. See this drop-off in the chart below and learn more here.

VC investments recorded the sharpest drop in more than two decades last year, surpassing the declines of the Dot-Com crash and financial crisis. See the rate of the recent decline in the chart below.

Why the decline in investing in the future? VCs tend to be optimistic about the long-term because the investments often take years to pan out. When VCs begin to pull out of the market, it is usually a signal that the economy’s future prospects are not good. What could be driving this dreary VC market sentiment?

  • Many economic analysts believe the globe is heading into a recession in 2023. Any potential customers from new VC start-ups become problematic.
  • There is a belief that global trade may slow down (deglobalization) due to geopolitical conflicts that may cause markets to constrict via various sanction regimes and the desire for many countries to source inside their own country.
  • Climate change and more extensive government controls are driving more regulations. More regulation raises the costs of new innovations and/or blocks bringing new ideas to markets.
  • As global interest rates rise, investors are happy to collect paid interest, making other non-VC investments more attractive.

Of course, inside these reasons stated above, niches can be developed, and innovators may try to capitalize on opportunities this environment creates. That being said, innovations based on arbitrary government mandates can be more dubious that innovations based on actual customer needs.

Remember, innovations are a crucial determinant in productivity that leads to higher standards of living. Fewer innovators do not bode well for global growth and jobs. Why are VCs less optimistic today? Give us your take in the comment section below.

By Tom Williams

Right Wire Report
Right Wire Reporthttps://rightwirereport.com/
Right Wire Report was a group of concerned citizens who took action to promote traditional values and work for a better America.

Trump Is World Peacemaker, United Nations Is A Disgrace

The major force for peace in the world today is Trump. He has accomplished more to end wars and save lives than UN, “the world’s best hope for peace.”

Happy 90th Birthday, Ron Paul, You Incorrigible Maverick!

Some people look to the Trump GOP takeover in 2016 as the moment the GOP transformed from a party different from the Democrat party.

Timed delivery

Reagan’s speeches were crafted to marinate our collective consciousness, while Trump’s aim for viral impact and an immediate dopamine engagement.

Whistleblower Exposes former A.G. Bill Barr!

Patrícia Lélis delivered evidence exposing an alleged visa fraud scheme involving former AG Bill Barr, Armstrong Williams, and other D.C. insiders.

Made in America is Coming Back!

Trump's tariffs and the reshoring of companies into the US, are making America rich and creating hundreds of thousands of jobs for Americans.  

Fed Official Says Latest Jobs Data Supports 3 Rate Cuts in 2025

One of the Federal Reserve governors said recent job data backs up her position that three interest rate cuts should be instituted in 2025.

Pilot Program Aims to Teach Kids the Value and Potential of Money

Middle School MBA focuses on business economics and is modeled after grad school degree programs scaled to appropriate age group.

European Leaders Call for Protection of Ukraine as Trump Set to Meet Putin

Coalition of European leaders released statement stressing need to ensure European and Ukrainian interests are protected during talks ending conflict.

DHS Remembers Victims of Serious Crimes Committed by Illegal Immigrants

Dept of Homeland Security on Aug. 6 commemorated the victims of fatalities and serious crimes committed this year by illegal immigrants in the US.

Trump Nominates Tammy Bruce as Deputy Representative to UN

President Trump nominated State Dept spokesperson Tammy Bruce as the U.S.’ deputy representative to the U.N. with the rank of ambassador.

US Treasury Sanctions Members of Mexican Cartel ‘Los Zetas,’ Including Rapper El Makabelico

Treasury Dept imposed sanctions against high-ranking members and an associate of the Mexican Cartel del Noreste, (Los Zetas) based in Mexico.

Trump Removes IRS Commissioner Billy Long

President Trump is replacing Billy Long as commissioner of the IRS less than two months after his confirmation, a WH official confirmed.

Trump-Brokered Armenia–Azerbaijan Peace Deal Secures US Trade Route

Trump will host leaders of Armenia and Azerbaijan at the White House to sign a joint declaration ending four decades of hostility between the two nations.
spot_img

Related Articles