By Yuvraj Malik
(Reuters) - Global venture capital investments fell to a near five-year low in the first three months of 2024, according to investment intelligence firm PitchBook, as high interest rates weighed on funding for companies despite big investments in the AI space.
Investors poured $75.9 billion in the January-to-March period, their lowest since the second quarter of 2019, PitchBook data showed. The number of estimated deals also fell to a near four-year low of 10,222, according to the data.
Tight monetary policy in the U.S. has contributed to a slow revival in initial public offerings, hampering what is among the biggest source of returns for venture capital firms, which typically invest in startups and sell shares during IPOs.
"Large companies remain stuck private, weighing on returns of the market and putting added pressure on investment and cash runways," said Kyle Stanford, lead venture capital analyst at PitchBook.
"We don't expect deal activity to pick up in a meaningful way in the near term."
The value of exit deals by VC firms was also at a six-year low of $234.3 billion last year, according to PitchBook data. Exits for U.S.-based VC firms were the lowest since 2016.
The slowdown has been partially offset by a jump in funding for AI start-ups, with a pick-up in tech IPOs in the first quarter of 2024 marking another positive sign for VC funding.
AI start-ups raised $42.5 billion last year, which, although lower from 2022, was a far lesser slowdown than the 42% decline in broader VC funding, according to intelligence firm CB Insights.
Top firms including Anthropic have raised billions of dollars from backers including Amazon.com (NASDAQ:AMZN).
With expectations of interest rate cuts later in the year, bankers and investors expect more IPOs in the months ahead.