Venture capital investors wary of deal-making despite stock market boost, Reuters report says

By Niket Nishant

(Reuters) – U.S. venture capital investors remained cautious about doing deals amid economic uncertainty, according to a PitchBook-NVCA report published on Thursday, highlighting challenges in the industry despite a rally in public markets.

About $37.5 billion was closed in the third quarter ended Sept. 30, down nearly 32 percent from the previous quarter, the report said.

Limited liquidity has led investors to negotiate tougher terms for startups, prompting many to hold off on funding until conditions improve.

The report highlights challenges in the VC space at a time when the spotlight has been on massive rounds for AI companies.

“AI companies are getting the most attention in business,” the report said.

Despite the slowdown in deals, interest rate cuts by the Federal Reserve may boost activity.

“While 50 basis points won’t be enough to start a business, it’s a step in the right direction,” said Emily Zheng, VC analyst at PitchBook.

A revival of the IPO market could further accelerate venture capital deals, giving investors more opportunities to exit their investments.

PRIVATE FOR MORE

Top startups like Stripe, OpenAI, and SpaceX are choosing to stay private longer, providing employees with liquidity through secondary sales of shares instead of going public.

“Secondaries are the best of both worlds. Companies can stay private longer, and investors who want liquidity can get it,” Zheng said.

The growing appeal of private equity may encourage some to delay their IPOs, especially if they get ample funding from private investors in the market.

“Democratization will come. The private market will continue to open up and this new asset class is here to stay,” said Howe Ng, head of private market analysis and investment solutions at Forge Global.