Global VC investment sank to $344 billion across 37,808 deals in 2023 from $531.4 billion across 51,894 deals in 2022 amid geopolitical, macro-economic and other challenges like high interest rates and inflation, a parched exit environment, and ongoing concerns related to startup valuations.

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The Americas accounted for more than half of VC investment this year ($183.6 billion), while the Asia-Pacific region attracted $92.4 billion, and Europe $62.3 billion, according to the KPMG Private Enterprise's 'Venture Pulse' report.

The fourth quarter (Q4) of 2023 was a particularly soft quarter for the VC market, with global investment falling to $74.9 billion across 7,572 deals — the lowest levels since Q3 2016, respectively.

The Asia-Pacific region also saw quite a slump, with investment falling to $18.8 billion in Q4 — the lowest level since Q1 2017, said the report.

"The Indian economy is quite strong -- capital markets at an all-time high, favourable demographics, strong GDP and a stable and active central government. However, the VC investments in the last few quarters have been muted as compared to quarters before," said Nitish Poddar, Partner and National Leader, Private Equity, KPMG in India.

"This is not an indication of slow-down but the post Covid-19 euphoria dying down where there was excess money supply in the system. “With expected easing of interest rates, I am very confident that there will be a strong bounce back in the VC investments in the country,” Poddar added.

As VC investors globally continued to pressure their portfolio companies to reduce costs and enhance their focus on profitability, both VC investment and deal speed slowed significantly.

The one major light in an otherwise dim quarter was artificial intelligence (AI) where investments were incredibly frothy as investor interest accelerated. AI-focused startups accounted for three of the $1 billion+ funding rounds this quarter. “The exit values in 2021 for VC-backed companies stood at a massive $1.5 trillion.

Since then, exits have faltered — with only $225 billion in exit value this year,” said Conor Moore, Global Head, KPMG Private Enterprise, KPMG International.

In the US, AI-focused companies attracted six of the 10 largest VC deals of the quarter. Europe also saw three very large AI deals. "AI will likely remain one of the most attractive areas of VC investment well into the year, while M&A activity could see some pick-up as opportunistic buyers look for bargains," said the report.

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