The Venture Activity Index – Q4 2023
Capital deployment remains depressed, sitting about 50% below trend
I’ve updated the Venture Activity Index for Q4 2023 data.
As a reminder, the VAI is an index measuring current venture investment across stages relative to the long-run trend. It’s a useful and simple barometer of activity and sentiment in the venture market. The methodology is here.
Some small modifications since the last version of the index that I published in Q2 2023:
Updated data for Q4 2023
Removed seasonality from the data
Removed super later stage rounds post-Series D. This was causing excess volatility that wasn’t representative of the overall venture market
With that out of the way, here’s where we’re at:
Capital deployment remains depressed, sitting about 50% below trend
We’ve hit the trough but remained there rather than recovered to trend. It's a bit of a dead cat bounce
Another interesting view of the data is to show the various components by stage:
The later stages spiked the most in 2021, the earliest stages the least. This then reversed, with late stage capital falling somewhat more than early stage capital
However, all stages are similarly depressed at this point relative to their respective trends
As I caveated in the first version of the index, if we continue to stay below trend I may need to update the definition of trend to recognize that we’re on a new trajectory. For now, I'll continue to use a long-term, constant growth rate to define the trend for each stage:
That's it! I think the data mostly speaks for itself here, so I'll keep my commentary light for this one. Will update this again next quarter.
Originally published on whoisnnamdi.com