Emmanuel OchayiMarket researcher PitchBook reports 30% year-on-year decrease in global venture capital investment, plunging to $73 billion in the third quarter of 2023—the lowest since the onset of the pandemic in 2020.
The downturn is attributed to factors like rising interest rates, inflation, and the ongoing conflict in Ukraine, inciting caution among investors towards high-risk assets such as start-ups.
Join our WhatsApp ChannelA shift is observed in the investment landscape. With VC activity notably reduced, there’s a rising trend of start-up takeovers by new investment groups. These groups are raising funding to acquire majority ownership and operational control of struggling start-ups, recognizing a need to assist companies in transitioning from venture to private equity ownership.
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Even as pressure mounts on start-ups to sell, deals are stalling as VCs grapple with the decision to cash out. Scott Driggs from Jefferies highlights the irrevocable nature of crystallizing losses, reflecting the growing hesitation within the VC realm.
Investors anticipate an upsurge in demand for such buyouts as companies face cash crunches. New investment groups like Resurge Growth Partners, Tiktok Capital, and Arising Ventures are stepping in to bridge the gap, targeting start-ups requiring a turnaround due to overvalued assessments or operational adjustments.
The move signifies a shift in the investment ecosystem, as the spotlight shifts from traditional venture investment to the salvaging and transformation of struggling start-ups, hinting at a new chapter in the start-up investment narrative.
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