VC Exit Value Sags to Lowest Level Since the GFC

PitchBook projects that exits of venture capital-backed companies will be worth only $20 billion in 2023, the lowest since 2009.


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It hasn’t been this hard for U.S. venture capital firms to sell or bring their start-ups public for a decade.

Venture capital firms are on track to exit — sell or bring public — $20 billion worth of companies, the lowest figure since 2009, according to the latest VC report from PitchBook. In the first half of 2023, the value of exits was $12 billion, significantly down from previous years.

The difficult exit environment follows a period of frenzied growth in private markets. In 2021, venture capitalists hit a record high of $777.2 billion in exit value, thanks to low interest rates and easily available credit. Even in 2022, when the initial public offering market began to deteriorate amid worsening macro conditions and rising geopolitical tensions, venture capitalists managed to achieve a total exit value of $75.7 billion.

Kyle Stanford, PitchBook’s lead VC analyst, told Institutional Investor that $12 billion in exits in the first half of the year is considered really low. “That’s less than 2 percent of the amount of exit value generated in 2021,” he said. “There’s been no tech IPOs. Acquisitions are really tough, too, because corporations are being smart with their money...They want to make sure to not make huge acquisitions right before a recession starts.”

As the report noted, “IPOs have not been viable options for VC-backed companies this year, despite the public markets showing positive returns on the year. Companies that were developed under the growth-at-all-costs mantra still need time to restructure their business models in a way that public market investors are willing to place a premium on, such as [by demonstrating] a well-developed path to profitability.”

Stanford added in the interview that private market investors aren’t used to focusing solely on profitability. But now, as exit environment worsens, profitability has become a necessity for investors seeking to exit through an IPO. “Public market investors are focusing on the fundamentals. You need to make sure you’re not overspending,” he said.

Exit activity has also been subdued globally. According to PitchBook, venture capitalists around the world achieved a total exit value of $51.5 billion in the second quarter, the second-lowest figure (after the first quarter of 2020, when global exit value dropped to $46.3 billion during the onset of the pandemic) since the first quarter of 2018.

“Public market opportunities are low, and more active antitrust scrutiny has kept large acquisitions sidelined as well,” the report said. “Global inflation and heightened geopolitical tensions among key venture markets have also pressured exits.”

According to the latest IPO report from Ernst & Young, the global IPO market raised $60.9 billion in the first half of the year, down 36 percent year-over-year. The Asia-Pacific region led with a 60 percent share of the value of global IPOs. Notably, mainland China accounted for five of the top 10 global IPOs during the first six months, according to the EY report.

EY anticipates a resurgence of global IPO activity as monetary tightening comes to an end in the second half of the year. “Certain theme-centric sectors such as technology and clean energy are signaling an upswing in IPO activity,” the EY report said. “In this shifting environment, companies need to prepare now to be ‘IPO-ready’ for any forthcoming windows.”