Q3 2022 Stormy Seas Ahead?

The Q3 2022 Pitchbook-NVCA Venture Monitor report highlighted some of the changes the venture capital marketplace is undergoing. Tightening monetary policy at home combined with war and economic instability abroad are expected to have near to medium-term impacts on the availability of capital, talent, commodities, and productive capacity across the world economy. The U.S. venture capital industry is subject to the same economic winds, but while the market has contracted somewhat from the heights of 2021, it is still performing well above historical norms.

However, there are potential challenges facing the venture capital industry on other fronts. Particularly domestic government action, monetary policy and investment trends, and foreign geopolitics.

Domestic Government Action

Over the past year, Congress has passed three significant pieces of legislation to modernize the U.S. economy — the Bipartisan Infrastructure Package, the CHIPS and Science Act, and the Inflation Reduction Act. These bills all provide incentives for VC participation, and if authorizing language and appropriated funds are managed effectively in the upcoming Congress, they could be transformative for various U.S. industries, including cleantech, semiconductors, and life sciences. More troublingly, there are a variety of regulations currently under consideration by the Executive Branch which could saddle venture-backed companies with uniquely onerous regulations when compared with larger companies in the market. Hopefully, Washington will prioritize strengthening the nation’s innovation ecosystem.

Monetary Policy and Investment Trends

As the Federal Reserve has sought to bring post-pandemic inflation under control by raising interest rates, there has been extensive anxiety (Read more...)