Global VC investment falls to lowest level in nearly seven years

Hong Kong- Global VC investment fell from a five-quarter high of US$95.5 billion in Q2’24 to a nearly seven-year low of US$70.1 billion in Q3’24, amid ongoing geopolitical conflicts, the continued exit drought, anticipated seasonal lulls in investment in several key jurisdictions, and the uncertainty driven by the upcoming US presidential election. The decline came despite another solid quarter of VC investment in AI; the sector accounted for six of the ten largest VC deals globally, including a US$1.5 billion raise by Anduril Industries and a US$1 billion raise by Safe Superintelligence, according to the Q3’24 edition of KPMG Private Enterprise’s Venture Pulse — a quarterly report that shines a spotlight on VC investment trends globally and in key jurisdictions around the world. 

While the Americas continued to attract the largest share of VC investment in Q3’24, total investment in the region still fell from US$58.6 billion in Q2’24 to US$41.4 billion in Q3’24. In Asia, VC investment fell from US$18.5 billion to US$15.6 billion quarter-over-quarter, while in Europe it dropped from US$17.9 billion to US$12.5 billion. Global exit value fell to a six-quarter low of US$39.2 billion, driven primarily by a slowdown in US-based exit activity—which fell from US$25.2 billion to US$11.2 billion between Q2’24 and Q3’24, as the number of exits fell to a seventeen-quarter low of 244.

Asia, which saw a five-year low of US$11.2 billion in exit value in Q2’24, saw exit value jump to US$18.2 billion in Q3’24. “AI investments drove the lion’s share of VC investment activity in Q3’24,” said Conor Moore Global Head, KPMG Private Enterprise, KPMG International. “But even within AI, many deals were smaller than we’ve seen in recent quarters. This reflects a trend in investors shifting their focus from core AI companies focused on LLMs (Large Language Models) and the like to companies with highly targeted industry solutions. Defense-tech was also a big winner in this quarter, in addition to biotech.” 

Q3’24—Key Highlights 

Global VC investment dropped from US$95.5 billion in Q2’24 to US$70.1 billion in Q3’24; the number of VC deals dropped from 9,270 to 7,227 over the same period. VC investment in the Americas dropped from US$58.6 billion in Q2’24 to US$41.4 billion in Q3’24—including from US$55.5 billion to US$37.5 billion in the US; in Asia, VC investment dropped from US$18.5 billion to US$15.6 billion, while in Europe it dropped from US$17.9 billion to US$12.5 billion. Global corporate VC investment fell from US$54 billion to US$35.2 billion between Q2’24 and Q3’24; this included declines from US$34.4 billion to US$19.6 billion in the Americas—including from US$32.7 to US$17.8 billion in the US—from US$10.7 to US$9.4 billion in Asia, and from US$8.5 billion to US$5.9 billion in Europe.  Global fundraising activity was well off the pace needed to match even 2023’s subdued total of US$202.8 billion; at the end of Q3’24, global fundraising stood at US$143.1 billion. 

AI sector sees six of the top ten deals globally in Q3’24

While VC investment could be considered low in all regions of the world this quarter, AI continued to garner a lot of interest in Q3’24. Six of the ten largest deals during the quarter were AI-focused, including a US$1.5 billion raise from US-based Anduril Industries, a US$1 billion raise by US-based Safe Superintelligence, a US$688 million raise by China’s Baichuan AI, a US$640 million raise by US-based Groq, a US$500 million raise by Canada-based Cohere, and a US$483 million raise by Germany-based Helsing. AI-powered defense-tech companies raised large rounds in Q3’24, including Anduril Industries and Helsing. China also saw AutoAI, which enables automotive companies to embed AI into their vehicles, raise US$107 million. 

AI Waiting game heading into Q4’24, but all eyes on 2025 

With the US election looming large on the global stage heading into Q4’24, VC investment will likely remain subdued for most of the quarter as investors take a wait-and-see approach until the results are decided. Given ongoing global geopolitical tensions, AI will likely remain a hot area of investment, in addition to defense-tech. There is a growing sense of optimism that exit activity is readying for a rebound, which would be very beneficial for the VC market globally heading into 2025. “We’ve had a long dry spell on the exit front globally, but market conditions are improving,” said Francois Chadwick, Partner, KPMG in the U.S.. “With interest rates dropping, M&A will likely start ticking up because acquisitions are becoming more viable. And while IPO activity will likely remain slow through Q4’24 due to the US election, all eyes will be on the IPO market heading into 2025.”