Beacon Macro View: Q4 2022
Well, we made it! 2022 has finally come to a close and wrapped up a tumultuous but pivotal year for the private markets. The glory days of low-interest rates, low inflation, and short fundraising cycles with >2x uplifts have been replaced by the exact opposite. Alongside that, the expectations of rapid growth at all costs have done a complete 180-degree shift, to focus on profitability and cashflow discipline.
While the broader VC market has been battening down the hatches, trying to prop up valuations of their companies whose growth and prospects suffered badly, Beacon joined a select group of VCs who — quietly content on the sidelines — saw their portfolios performing strongly (and in some cases far better than expected). In our case, this was the result of the focused portfolio which combined small, early-stage investments that held their ground with much bigger later-stage ones in companies that outperformed.
While the global VC investment took a beating, Europe was able to rope-a-dope a bit better and withstand some of the punches. The US and Asian VC investment declined 36% and 39% respectively YoY, while Europe dropped only 25% YoY with a total of $90bn invested across startups throughout 2022.
While the overall market wasn’t as bad as we all first thought, when you dive into the detail, there are some concerning stats we must take a look at. Firstly, the mega-round (deals of $100m or more) took a dive, dropping from 224 in 2021 to 170. However, the details within 2022 are even more drastic, as 80% of the 170 deals came in H1, showing the reluctance of the market to commit late-stage capital, which brings us to our next point.
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