• Global CVC-participating investment falls from $40.8 billion to $37.3 billion despite increase in the Americas
• Europe sees VC investment rise to $17.9 billion on back of $5.2 billion deal in Sweden
• VC investment drops to $38.2 billion in Americas and to $18.9 billion in Asia-Pacific

Global venture capital (VC) investment fell slightly from $83.8 billion across 9,458 deals in Q4’23 to $75.9 billion across 7,520 deals in Q1’24 amid geopolitical tensions, the extended drought in exits among VC-backed companies, and a continued pullback in investment at later deal stages. The level of VC investment in Q1’24 was the lowest since Q2’19, while the number of VC deals was the lowest since Q2’16.

The numbers are helped by a $5.2 billion raise by Sweden-based H2 Green Steel and a $4 billion raise by U.S.-based Anthropic, according to the Q1’24 edition of KPMG Private Enterprise’s Venture Pulse—a quarterly report that shines a spotlight on VC investment trends globally across key jurisdictions around the world. China also saw two $1 billion+ megadeals during the quarter—a $1.1 billion raise by IM Motors and a $1 billion raise by YueZhiAnMian.

VC investment dropped in both the Americas and Asia this quarter, while it rose in Europe entirely on the back of H2 Green Steel’s raise. The Americas accounted for almost half of global VC funding in Q1’24 ($38.2 billion across 3,205 deals)—with the U.S. accounting for the vast majority of this amount ($36.6 billion across 2,882 deals). Meanwhile, Asia-Pacific attracted $18.9 billion across 2,305 deals), while Europe saw $17.9 billion across 1,798 deals.

However, global exit activity remains muted falling from $49.8 billion in Q4’23 to $30.7 billion in Q1’24—the lowest level since Q4’16. This is despite an increase in the U.S. from $12.5 billion to $18.6 billion quarter-over-quarter. Exit activity in Asia experienced the worst decline, falling to $10 billion in Q1’24, compared to $33.9 billion in Q4’23.

“Given how dry the exit environment has been for the last eighteen months, it’s no surprise VC investors are being very conservative in their deal making right now,” said Conor Moore Global Head, KPMG Private Enterprise, KPMG International. “VC investors, including corporate investors, are really tightening their purse strings, particularly at the later deal stages. The only real exceptions we’re seeing right now are companies focused on AI or cleantech -which may soon extend to include Cybersecurity as corporates look to manage their AI-driven cyber risk.”

Q1’24—Key Highlights

• Global VC investment dropped from $83.8 billion in Q4’23 to $75.9 billion in Q1’24; the number of VC deals dropped from 9,458 to 7,520 over the same period.
• VC investment in Europe rose from $15.1 billion in Q4’23 to $17.9 billion in Q1’24, while it dropped from $43.4 billion to $38.2 billion in the Americas—including from $40.1 billion to $36.6 billion in the U.S.—and from $22.9 billion to $18.9 billion in Asia.
• Global corporate-participating VC investment fell from $40.8 billion to $37.3 billion between Q4’23 and Q1’24, despite an increase from $18.7 to $20.1 billion in the Americas.
• Global exit value dropped from $49.8 billion in Q4’23 to $30.7 billion in Q1’24.
• Exit activity in the Americas rose from $12.5 billion to $18.6 billion between Q3’23 and Q4’24, while exit activity in Asia dropped from $33.9 billion to $10 billion, and from $3.4 billion to $2.1 billion in Europe.
• Total global exit value was very low across exit types in Q1’24, with just $23.2 billion in IPO exit value, $6.9 billion in M&A deal value, and $0.56 billion in buyout deal value.

Cleantech and AI sectors account for eight of the top ten deals globally in Q1’24

Cleantech and AI proved to be the exceptions to the rule when it came to the downturn in global VC investment, with each sector attracting strong investment in Q1’24. Together, the two industries accounted for eight of the top ten deals globally this quarter.

On the cleantech side, Sweden-based green infrastructure company H2 Green Steel raised the largest deal ($5.2 billion), followed by China-based EV manufacturer IM Motors ($1.1 billion, U.S.-based battery manufacturer Ascend Elements ($704 million) and China-based new energy power generation company Huakong Power ($696 million).

On the AI front, U.S.-based large language model focused Anthropic raised $4 billion, China-based large language model focused YuiZhiAnMian raised $1 billion, U.S.-based AI-driven robotics company Figure AI raised $675 million, and China-based generative AI focused MiniMax AI raised $600 million.

U.S. accounts for $32.7 billion of the $36.4 billion of VC investment in the Americas in Q3’23

VC investment in the Americas fell to its lowest level since Q4’19, with just $38.2 billion in VC investment across 3,205 deals in Q1’24. The U.S. accounted for the vast majority of this amount—$36.6 billion across 2,882 deals. In addition to AI and Cleantech, health and biotech were big winners in the Americas, with asthma-focused Areteia Therapeutics raising $425 million, inflammatory and fibrotic disease focused Mirador Therapeutics raising $400 million, and precision medicine focused Alumis raising $259 million.

VC investment outside of the U.S. was very quiet in Q1’24. In Canada, VC investment dropped to a 22-quarter low of $766 million between Q4’23 and Q1’24. In Brazil, VC investment dropped from $533 million to $342 million in Brazil, while in Mexico it dropped from $268 million to $32.3 million.

Europe sees VC investment grow due to H2 Green Steel megadeal

Europe was the only region to see VC investment increase this quarter—from $15.1 billion in Q4’23 to $17.9 billion in Q1’24, although the number of deals dropped from 2,419 to 1,798 over the same period. The $5.2 billion raise by Sweden-based H2 Green Steel was the major driver of this increase, far surpassing the size of other deals in the region. U.K.-based neobank Monzo’s $431 million raise was the second largest VC deal in Europe, followed by France-based generative AI company Mistral AI ($415 million), the Netherlands-based grocery e-commerce company Picnic ($389 million), and France-based EV maker Electra ($334 million).

At a jurisdictional level, the Nordics region and France saw VC investment increase—to $6.3 billion and $2 billion respectively; meanwhile, VC investment in the U.K. and Germany dropped—to $3 billion and $1.8 billion respectively.

VC investment in Asia-Pacific sinks to seven-year low

VC investment in the Asia-Pacific region dropped from $22.9 billion in Q4’23 to $18.9 billion in Q1’24—the lowest quarter of investment since Q1’17. Despite a $1.1 billion raise by IM Motors, a $1 billion raise by YouZhiAnMian, and a $941 million raise by Yuanxin Satellite, VC investment in China fell to just $11.5 billion—the lowest quarter since Q1’20. In India, both VC investment and the number of VC deals rose, from $1.6 billion across 313 deals in Q4’23 to $3.2 billion across 354 deals in Q1’24; the largest deal in India during the quarter was a $421 million raise by e-pharmacy PharmEasy. Japan attracted $934 million in VC investment during the quarter.

All eyes on the U.S. IPO market heading into Q2’24

While there will not likely be a major increase in VC investment globally during Q2’24 due to the ongoing macroeconomic uncertainty and lack of exits, all eyes will be watching the U.S. IPO markets quite carefully. Should there be a few successful IPOs to start the quarter, there could be some pressure on VC firms to open their funding taps a bit wider.

“We’ve seen a big push towards AI over the past year,” said Francois Chadwick, Partner, KPMG U.S. “Looking ahead to Q2 and beyond, VC investors are going to start narrowing their field of focus away from anything to do with AI to startups and solutions able to prove their value—from those focused on large language models that underpin generative AI capabilities to solutions able to create real efficiencies for companies—such as by dramatically improving document handling.”

Pangratios Vanezis, Head of KPMG Startups Innovation Lab, Enterprise and Startups commented: “The VC market continues to recalibrate its overall strategy towards being conservative and cautious, with a handful of deals in specific sectors such as Cleantech and AI. Europe, mainly the UK and Germany, is falling behind, while the US is doing most of the work in the Americas. This is potentially a sign that innovation is slowing down or being muzzled early on, especially in areas with significant birth gaps and aging populations where meaningful human capital movement has been restricted”.