PitchBook – Quantitative Perspectives Turbulence on the Approach, 3Q 2023

The introduction to PitchBook's Quantitative Perspectives report discusses the current state of the economy and the venture market. It notes that despite the Federal Reserve's rate hikes, the economy has not experienced a nosedive and public markets have begun to recover. Inflation is also slowing, and the idea of a soft landing for the economy is gaining traction. However, the venture market is facing challenges with a low supply of capital. There are over 51,000 VC-backed companies in the US that are in need of funding, but investors are hesitant to provide it. This high number of companies is a problem, especially as it has doubled since 2016. The major hurdle for the venture market is the lack of exit options, particularly public listings. While there were a significant number of IPOs and deSPAC mergers in 2021, the market for VC-backed IPOs has not fully rebounded. The report also highlights some key takeaways: macroeconomic indicators suggest a high probability of a recession in the next 18 months, challenging market conditions for tech indexes, a slow recovery in US VC exit activity, and a decline in VC dealmaking activity. However, artificial intelligence and machine learning VC dealmaking remains resilient. Overall, the report suggests that the VC market is currently investor-friendly, but startups are struggling to raise funds in a sluggish exit environment.