A Look at Q3 2022: How Have Macro Trends Affected Philly VC Dollars?

Editor’s note: These figures may vary slightly, as some transactions are only taken into account several weeks after the publication of the quarterly venture capital reports.

After quarter after quarter of record venture capital spending in the Philadelphia area, the third quarter of 2022 turned out to be noticeably calmer.

PitchBook and the National Venture Capital Association dropped the Q3 2022 PitchBook – NVCA Venture Monitor on Thursday, with data showing the Philadelphia area saw no more than or near $1 billion in investment for the first time in seven quarters. The region has consistently seen huge deals over the past two years, with $4 billion invested in 278 deals in the first half of 2022 alone.

But a slowdown in Philadelphia that follows national trends isn’t necessarily a bad thing, according to the report and a local expert. Let’s go.

How did Philly perform?

The region attracted $629.59 million in venture capital from 89 deals in the last quarter, compared to nearly $2.7 billion in the second quarter from 123 deals and $1.3 billion in the first quarter from 155 transactions. The top deals this quarter in Philadelphia were primarily with biotech and life science companies, with Biomed Orchestra net the largest investment in July at $110 million. Vitara Biomedical followed in July with $75 million, and Savannaha fintech software company, took third place with $45 million invested in a Series A.

This report also notes a $25 million increase for the mental health platform NeuroFlowand Strong Robotics‘ A $25 million fundraiser.

Other deals on the list include $40 million for software company Wayne Purple Lab$31 million for the Philadelphia biotech company Go inside$30 million for computer networking company Wayne Cornelis Networks$24 million for financial services firm Berwyn Credit exchange adviser and $22 million for home care service King of Prussia InHomeTherapy.

The market here in Philadelphia mirrored much of the United States, where the amount of dollars spent and the number of transactions those dollars were spent on was down. According to the report, the only region in the United States to bring in more venture capital dollars and deals in the last quarter than the previous was New England. There has again been a significant amount of investment in healthcare, clean technology and transportation companies this year. Overall, the entire country has seen only 59 public announcements so far, compared to 303 last year.

Dean Millerpresident of thePhiladelphia Alliance for Capital and Technology (PACT)Told Technically this downward trend does not concern him. Macroeconomic trends always have a big impact on all industries, he said, and venture capital is not immune.

“Major companies started cutting spending early in the year and the company is a quarter or two behind the public markets,” Miller said in an email. “Fundamentally, I’m not concerned with Philadelphia’s long-term prospects as a growing ecosystem for startups. Our position as a leading and growing region for cell and gene therapy, enterprise technology and consumer startups, among others, is built on solid foundations. »

[Editor’s note: Read Technical.ly’s July deep dive on these market changes: “As VC deals and valuations decline, what’s a tech founder to do? Don’t panic, these pros say“]

Where is the venture capital market going

The Venture Monitor report echoes Miller’s sentiments, pointing out that rising interest rates and “complicated” macroeconomic trends are influencing the venture capital market and companies considering going public. While third-quarter activity was below some all-time highs in 2021 and early 2022, activity this quarter follows generally positive market trends, he said. The report also called on the Inflation Reduction Act and the CHIPS and scientific law huge investments in technology and infrastructure that will likely help businesses in the future.

Venture capital deal activity in the US since 2012. (Image via PitchBook-NVCA Venture Monitor report)

Although 2022 sees fewer VC dollars and deals than 2021, the trend is towards the direction the market was heading before this peak year. Heading into the fourth quarter, the country was on track to see more deals than in 2019 and 2020. Angel and seed deals were down slightly from previous years, returning to 2020 levels, according to The report. And other start-up investments followed suit.

“Continued volatility in public markets has weakened the deployment of capital into early-stage deals as investors become more apprehensive of large and outlier deals over the past two years,” the report said. “Investors are focused on investing in the fundamentals of a startup instead of relying on another venture capital firm to invest at an even higher valuation.”

Later-stage funding is following a similar path – below 2021 figures, but on track to beat 2019 and 2020 figures. The report summarizes that although the figures are not comparable to a year ago , 2021 has been a truly exceptional year for venture capital, almost an outlier. Compared to the years before 2021, Philly and the rest of the country may be in a period of readjustment, but still on track for overall growth over the years.

“Third quarter facts paint a mixed picture for the venture capital industry,” Venture Monitor wrote in its report. “Investors are signaling that they are making deals, and there is consensus among managers and founders on how to prepare for potential challenges ahead.”


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