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Laxman Pai, Opalesque Asia:

Capital raising by venture capital (VC) funds in Q2 fell just 9% compared to Q2 2021, to $53.5bn, but lower distributions and longer hold periods could hit in H2, said a study.

According to Q2 2022 Venture Capital Report by Preqin, the number of funds closed was down by 56.4% in Q2 2022 compared with the same period last year.

Meanwhile, aggregate capital raised fell by just 9%, compared to Q2 2021. This strength is unlikely to continue into the second half of the year. As hold periods extend and distributions slow, this solid performance in H1 is unlikely to be repeated in H2.

"With global markets experiencing a huge amount of turmoil during 2022, venture capital could be the private capital asset class most exposed. Concerns over start-ups' high cash burn rate and limited exit options caused by the global equity sell-off are extending funds' holding periods and slowing capital distributions. This has created the knock-on effect of weakening fundraising, and Preqin analysts expect a more pronounced slowdown in H2 2022," the report pointed out.

In the meantime, global IPO exits are down 65% in Q2 2022 to 75, compared to 217 in the same period last year, Preqin said.

A tough IPO exit environment is making it difficult for VC funds to provide liquidity for investors. As a result, holding periods have increased. This means funds are lasting longer and distributions are slowing.

"Global venture capital deal numbers declined ......................

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