Startup whiplash hits some sectors harder than others

There is no denying that 2022 has been a challenging year for startups. But it hasn’t been equally difficult for all sectors of the VC-backed ecosystem.

We used PitchBook data to examine how deal value, deal count, and valuations across 11 verticals fared in 2022. Although investor interest in most sectors has been higher than in any year leading up to 2021, our analysis shows that, through December 9, only about each vertical declined in value and account since 2021.

But for some verticals, the pullback in investment activity was much larger than for others.

relative laggards

edtech, a pandemic love, posted the most dramatic decline from 2021 to 2022. The vertical’s value and transaction count fell 57% and 24%, respectively. Investors reduced their allocations towards educational technologies as many students returned to in-person learning. Despite the slowdown, the median valuation of edtech startups raising funds in 2022 was 9% higher than last year.

electronic commerce it’s another sector that has lost much of its pandemic-induced luster. Venture capitalists have reduced their investments in online shopping and delivery businesses by 45% and 27% based on transaction value and count, respectively. The slowdown in e-commerce activity is likely due to macroeconomic headwinds (consumers are believed to be under pressure), as well as a reversal of pandemic trends when in-person shopping increased the risk of contracting COVID-19. However, the median valuation of e-commerce companies increased by 12% in 2022.

agtech it is another vertical that saw less interest from investors than in 2021. It is the only vertical in our analysis where all three metrics (transaction value, transaction count, and valuation) fell. The declines are likely due to general macroeconomic pressures, as other factors such as climate change, the war in Ukraine, supply chain disruptions and population growth should theoretically have helped lift prices. investments in this vertical, said Alex Frederick, a PitchBook. analyst focused on agtech and foodtech.

Finally, investors became more cautious with their investments in financial technology. The vertical had an outstanding year in 2021. Companies like Robin Hood, Say Y nubank reach public markets, and capital flowed freely to its imitators and other fintech startups. But by the second half of 2022, it became clear that many companies in this vertical had gotten ahead of themselves. witnesses like Stripe, Tartan Y Brex they have laid off double-digit percentages of their workforce. Investors realized that “many fintechs have yet to prove that their business models are profitable,” said Rudy Yang, a fintech analyst at PitchBook.

relative leaders

crypto and blockchainFocused startups had a strong year in 2022. The vertical had only a slight drop in deal value, and is the only sector in the dataset with an increase in deal count in 2022. But the relative winner this year has a high probability of becoming next year’s loser. A series of bankruptcies in this space probably have a chilling effect in investments in crypto and blockchain startups for some time.

health tech offers have also fallen this year compared to 2021. While healthcare technology is not immune to macroeconomic pressures, it is was more resilient on the basis of deal value than most other verticals in the data set. “People will continue to get sick and seek care; families will continue to grow and there is only an increasing need for solutions, particularly in underfunded and overlooked areas, including women’s health,” said Deena Shakir, general partner of lux capitalhe said via text message.

While investors have invested considerably less capital and backed less climate technology startups in 2022, have been willing to pay much higher prices for companies in the vertical. Deals in this vertical saw a 41% higher median valuation than in 2021. Climate tech prices have been heating up, partly in response to the Cut Inflation Act, which committed about $370 billion to combat climate change.

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