PitchBook News - The overcapitalization of VC

Our demand-to-supply model has shown the VC late-stage at a deficit of nearly 3x, meaning companies currently need about three times more capital than is entering the market.

This is a huge deficit, but up until recently, the market hadn't seen some of the expected impacts. Down rounds didn't increase by any significance until Q2 of this year (15.2% of completed rounds during the quarter), and company failings or last-option M&A haven't been major storylines, either.

However, what the model can't account for is the increasing time between rounds as companies choose not to raise and rely on current cash runways. Around mid-2021, the model shows that $55 billion extra had been invested into the venture market, and companies were coming back to raise at the quickest pace in our dataset.

This overcapitalization of the market has seemingly given many companies a better toolkit to navigate the current climate. Alongside layoffs and debt, two runway extenders, the venture market likely hasn't been in as bad of shape as the model shows. At least not yet.

For more data and analysis, download our free research: Accounting for the Overcapitalization of VC