Venture Capital meltdown! Damp Q3 but one hot sector is thriving

In what seems like a dramatic shift, global venture capital (VC) investments have shrunk sharply during third quarter of FY24. According to a report by KPMG, VC investments fell from $95.5 billion in Q2 to $70.1 billion in Q3, while deals also dropped from 9,270 to 7,227. downturn was witnessed across Americas, Asia, and Europe with a decline in deal value and volume.

Americas reported a drop in investment dropped from $58.6 billion to $41.4 billion; US investments alone dropped from $55.5 billion to $37.5 billion. European market hit a four-year low, down to $12.5 billion and Asia witnessed a seven-year-low of $15.6 billion. Both deal sizes and values dropped significantly across region.

Corporate VC investment has also taken a hit with a sharp downturn from $54 billion in Q2 to 35.2 billion in Q3. Americas saw maximum decrease with US witnessing a corporate investment drop from $32.7 billion to $17.8 billion. Global exits which show measure of companies reaching IPOs or acquisitions too dropped from $52.9 billion in Q2 to $39.2 billion in Q3.

Despite downward trend, artificial intelligence has emerged as a top sector attracting six out of 10 largest global deals in Q3 including $1.5 billion raised by US-based Anduril Industries and a $1 billion raise by Safe Superintelligence. Investments in AI-driven defence tech too witnessed  significant interest, especially in US and Germany where companies like Helsing raised $483 million, marking major deals.

However, some markets bucked trend, with Canada’s VC investment doubling quarter-over-quarter, driven by high-profile fundraises from Clio and Cohere.

In Japan, VC investment surged to a 12-quarter high of $1.8 billion, powered by AI and tech invation. US election is one of main reasons, for which many investors are maintaining a wait and watch approach. However experts are also of opinion that 2025 could see a growth in exits and acquisitions.

“With interest rates dropping, mergers and acquisitions could pick up, setting st for a potential rebound heading into new year,” ted Francois Chadwick, a partner at KPMG.
With global VC cooling off, eyes are on artificial intelligence and wher would sustain its momentum.