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Global venture capital investments reached $368.5 billion in 2024, up 5.4% from $349.4 billion the previous year, according to the industry’s first overview. Pitchbook-NVCA Venture Monitor for Q4 2024 report.
But the number of global deals in 2024 fell 17%, to 35,686, from 43,320 a year earlier in 2023. AI deals as a percentage of all deals increased for the year, as you can see it in the graph below.
Global transactions in 2024 are down 50.9% from the $751.5 billion in the record year of 2021 and down 37% from the 57,068 transactions recorded in 2021.
AI deals now loom large in the picture. There were 8,343 global AI deals 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 in 2024 was $131.5 billion, 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 transaction value in 2024, up from 24.7% in 2023. And AI and machine learning accounted for 23.4% of global transaction value in 2024, up from 20% in 2023. In 2021, AI accounted for 18.7% of global transaction value in 2024, up from 24.7% in 2023. % of global transaction value and 17.5% of global number of transactions.
Fourth quarter global figures
Globally, in the fourth quarter, the Asia-Pacific region’s venture capital market has struggled over the past few years, which has not changed in 2024, said Kyle Stanford, senior venture capital analyst. risk at Pitchbook.
Compared to Europe and the United States, the amount of dry powder accumulated in different markets in the Asia-Pacific region was much lower, which put additional pressure on closing deals during the past year. China, which accounts for about half of annual transactions in Asia-Pacific, has seen a significant decline in activity, due to both economic challenges in the country and tensions with the US government, which has reduced activity companies headquartered in the United States. businesses. Only 20.4% of transactions took place in Asia, the lowest proportion in the last decade.
Globally, AI has continued to make headlines and be the focus of investor investment, although some have pointed out that the investment activity is unsustainable in the long term. Whether this is true or not is trivial at present.
Just over half of all venture capital invested globally in the fourth quarter went to an AI-focused company. It is true that this amount was heavily influenced by OpenAI, Databricks, xAI and other well-known companies that launched stock buybacks and invested in chips and computing power needs, but the most important factor is the level of capital available for AI in relation to this. with other sectors, Stanford said.
The proportion of total deals done with AI companies has steadily increased over the past two years as major companies and investors strive to harness the expected efficiencies of the next technology wave, a- he declared.
“VC-backed exits have not been strong in APAC, although many markets are still too young to develop a healthy exit environment,” he said. “The lack of exits in many regions has caused many foreign investors to become weary of increased activity during the market downturn. Japan is an exception in terms of numbers, as many IPOs in the country have helped generate returns for investors. By 2024, 19% of global venture-funded exits came from companies based in Asia.
Fundraising has been slow globally, with new commitments falling just over 20% year-over-year. The lack of releases has had a significant impact on fundraising for Asia, as LPs have been less inclined to honor their commitments at this time. 2024 was the lowest year for new commitments since 2018, and the lowest year for closed-end funds in the market over the past decade. North America and Europe have also struggled to secure new commitments from venture capital funds.
Fourth Quarter U.S. Deals
U.S. transactions remained relatively robust in the fourth quarter of 2024 from an accounting perspective and increased marginally by 3.7% from a year earlier, Pitchbook and NVCA said. During the quarter, AI-related transactions accounted for almost half (46.4%) of the total transaction value in the United States.
Stanford said this seems counterintuitive to the market narrative over the past few years, but it indicates the persistence of some risk mechanisms from a few years ago.
“What happened was that excess dry powder from the high fundraising years of 2021 and 2022 kept many investors active in the market despite the lack of yield,” Stanford said. “With the slow fundraising years of 2023 and 2024, we should likely see this relative robustness begin to deteriorate as funds exhaust their available capital and are unable to raise a subsequent fund.”
Artificial intelligence continues to be the market story and has generated the near majority of venture capital investments in 2024, he said. OpenAI, xAI, Anthropic and others have become synonymous with outsized VC deals and apparently operate in a different funding environment than most VC-backed companies that continue to struggle with availability. less capital, Stanford said.
But the lack of exits remains the problem in the venture capital market, even if the outlook is more encouraging, he said. Only $149.2 billion in exit value was created in 2024, largely coming from a handful of IPOs. Unicorns, which hold about two-thirds of the value of the U.S. venture capital market, have held on as private companies, creating pressure on investors and limited partners due to the lack of distributions.
Mergers and acquisitions have also been “quiet in 2024,” with few major deals of note, Stanford said. A more acquisition-friendly environment in 2025 could pave the way for a renewed M&A market, particularly if a soft landing of the economy can be fully organized, he said.
In the United States, fundraising was dominated by large, established companies. Thirty companies accounted for more than 68% of the total fundraising value in 2024. This is a trend that has been growing over the past few years, but took center stage last year , Stanford said.
Many emerging managers who raised funds during the ZIRP-era venture capital market boom have been unable to generate returns and have portfolios disrupted by the valuation changes that occurred during the market shift. Without a track record, many companies find it a very difficult market to secure new commitments from LPs, Stanford said.
European venture capital market
In Europe, the value of venture capital deals reflected a slight decline, while the number of deals fell about 16% from last year, Pitchbook analyst Nalin Patel said, as a more cautious environment appears in 2024.
European deal activity declined during early financing stages, across the majority of verticals and across several regions, due to a more challenging financing market.
He said AI generated just over a quarter of deal value in the region in 2024, on just over 23% of financings completed. Large, outsized deals attributable to other venture capital markets have not materialized in the same amount in Europe, keeping the proportion of deal value in line with the number.
And he said the exit value increased in 2024, largely due to Puif’s listing. Elsewhere, it was a quiet year for venture capital-funded European exits, particularly on the listings front, with companies avoiding exits.
“We expect exits to accelerate in 2025 as market conditions improve,” Patel said.
Capital raised by Europe-based venture capital funds remained stable year-on-year in 2024 and remained below the peak set in 2022. The number of funds also declined in 2024, falling by around a fifth compared to 2023. Lower number of funds and stable capital raised figures indicate that there are fewer, but larger funds closed in 2024.
The prospects?
One way to determine how much dry powder the industry has and whether venture capital firms are successful themselves is to look at how successful they themselves have been in raising money. This is where the news seems pretty bleak, or at least corrected now compared to the overrated days of 2021.
In 2024, 1,344 funds raised capital, up from 2,333 in 2023 and a record 4,283 in 2021. In terms of capital raised, the 1,344 VC firms raised $169.7 billion in 2024, up from $213.8 billion in 2023 and down from record $404.4 billion in 2021.
