Global VC investments rose 5.4% to $368.5 billion in 2024, but deals fell 17% | NVCA/Pitchbook

Global Venture capital investments rose to $368.5 billion in 2024, up 5.4% from $349.4 billion the previous year, according to the first look at the study Q4 2024 Pitchbook-NVCA Venture Monitor Report.

But the number of global deals fell 17% to 35,686 in 2024, compared to 43,320 the previous year in 2023. The share of AI deals in total deals increased over the year, as you can see in the chart below.

Global deals in 2024 fell 50.9% compared to $751.5 billion in the peak year of 2021, and the number of deals fell 37% compared to 57,068 deals in 2021.

AI deals now play a big role. There were 8,343 AI deals worldwide in 2024, down 3.6% from 8,661 in 2023 and down 16.6% from 10,007 in 2021.

The value of these global AI deals was $131.5 billion in 2024, up 52% ​​from $86.3 billion in 2023 and down 6% from $140.2 billion. dollars in 2021.

AI and machine learning accounted for 35.7% of global business value in 2024, up from 24.7% in 2023. And AI and machine learning accounted for 23.4% of global business value in 2024, up from 20% in 2023 . In 2021, AI accounted for 18.7% of global deal value and 17.5% of global deal count.

Global figures for the 4th quarter

On a global level, the Asia-Pacific venture capital market has struggled in the fourth quarter in recent years, which has not changed in 2024, said Kyle Stanford, senior VC analyst at Pitchbook.

Compared to Europe and the US, the amount of dry powder accumulated in various markets in APAC was much lower, putting further pressure on deals last year. China, which accounts for around half of APAC’s annual business activity, has seen a significant decline in activity, reflecting both economic challenges in the country and tensions with the US government, which is restricting the activities of companies headquartered in the USA has restricted companies. Only 20.4% of deals were made in Asia, the lowest proportion in the last decade.

Globally, AI continues to dominate headlines and investors’ investment focus, although some note that investment activity is not sustainable in the long term. Whether this is true or not is trivial at the present moment.

Just over half of all VC investments globally in the fourth quarter went to an AI-focused company. It’s true that this amount was heavily influenced by OpenAI, Databricks, xAI and other well-known companies paying for stock buybacks and investments in chips and computing power needs, but the most important factor is the level of capital availability for AI compared to other sectors said Stanford.

The share of all deals going to AI companies has risen steadily in recent years as large companies and investors alike seek to capitalize on the expected efficiencies of the next wave of technology, he said.

“VC-backed exits have not historically been particularly strong in the APAC region, although many markets are still too young to develop a healthy exit environment,” he said. “The lack of exits in many regions has left many foreign investors weary of increased activity during the market slowdown. Japan has been an outlier in terms of numbers, as many IPOs in the country have helped boost investor returns. In 2024, 19% of global VC-backed exits came from Asia-based companies.”

Global fundraising was slow, with new commitments down just over 20% year-on-year. The lack of exits had a major impact on Asia fundraising as LPs were less inclined to re-commit at this point. 2024 marked the lowest year for new commitments since 2018 and was the lowest year for closed-end funds in the market in the last decade. North America and Europe also struggled to secure new commitments to venture funds.

US deals in the 4th quarter

According to Pitchbook and the NVCA, U.S. dealmaking remained relatively robust from a counting perspective in the fourth quarter of 2024, rising slightly by 3.7% year-over-year. In the quarter, AI deals accounted for nearly half (46.4%) of total U.S. deal value.

Stanford said it appears to contradict the market narrative of recent years, but is indicative of a holdover of certain risk mechanisms from a few years ago.

“What has happened is that the surplus of dry powder from 2021 and 2022 with high fundraising has kept many investors active in the market despite a lack of returns,” Stanford said. “Given the slow fundraising years of 2023 and 2024, this relative resilience is likely to deteriorate as funds have exhausted their available capital and are unable to raise another fund.”

Artificial intelligence continues to be the story of the market, bringing in almost the majority of VC dollars in 2024, he said. OpenAI, xAI, Anthropic and others have become synonymous with outsized venture deals and appear to be operating in a different funding environment than most VC-backed companies, which continue to struggle with lower capital availability, Stanford said.

But the lack of exits remains the story of the venture market, even if the outlook is more hopeful, he said. Only $149.2 billion in exit value was created in 2024, most of which came from a handful of IPOs. Unicorns, which hold about two-thirds of the U.S. VC market value, have asserted themselves as private companies and put pressure on investors and limited partners by missing distributions.

Mergers and acquisitions remained “quiet” in 2024, with few large deals, Stanford said. A more acquisition-friendly environment in 2025 could set the stage for a renewed M&A market, particularly if a soft landing for the economy can be fully achieved, he said.

In the US, fundraising was dominated by large, established firms. 30 companies accounted for more than 68% of total fundraising value in 2024. This is a trend that has been developing in recent years but came to the forefront last year, Stanford said.

Many of the emerging managers who raised money in the VC market during the ZIRP-era boom have been unable to generate returns and their portfolios have been troubled by the valuation changes that have occurred as the market has shifted. Without a track record to speak of, many firms face a very difficult market to attract new commitments from LPs, Stanford said.

European VC market

In Europe, the value of VC deals reflected a slight decline, while the number of deals fell about 16% year-on-year, said Pitchbook analyst Nalin Patel, due to a more cautious environment in 2024.

European deal activity was down in earlier funding stages, across most sectors and in several regions, as a tougher funding market emerged.

He said AI brought just over a quarter of transaction value to the region in 2024, with just over 23% of completed financings. The large, outsized deals associated with other venture markets did not occur in the same volume in Europe, so the share of deal value remained in line with the number.

And he said the exit value increased in 2024, largely due to Puif’s listing. Otherwise, it was a quiet year for European VC-backed exits, particularly in terms of listings, as companies avoided exits.

“We expect exits to increase in 2025 as market conditions improve,” Patel said.

Capital raised by European-based VC funds remained flat in 2024 compared to the previous year and remained below the peak set in 2022. The number of funds also fell in 2024, falling by about a fifth compared to 2023. Larger funds were closed in 2024.

The view?

One way to see how much dry powder the industry has and whether VCs themselves are successful is to look at how well they have managed to raise money themselves. The news here looks pretty bleak, or at least corrected now compared to the overhyped days of 2021.

In 2024, 1,344 funds raised capital, down from 2,333 in 2023 and a record 4,283 in 2021. In terms of capital raised, the 1,344 VCs raised $169.7 billion in 2024, down from $213.8 billion US dollars in 2023 and less than the record $404.4 billion in 2021.