Pitchbook’s newest report, the Emerging Technology Indicator (ETI), reported that Q3 2022 deal value across 30 technology segments was down, falling for the third consecutive quarter. Deal value was holding at $4.7 billion across 153 deals for Q3 which was a 32% decline from Q2 ($6.9 billion across 244 deals) and down 52% from Q1 ($9.8 billion across 275 deals).
The technology segments covered in the report included Web3 and decentralized finance ($878.9 million across 24 deals); Fintech ($737.4 million across 24 deals); Biotech ($725.8 million across 11 deals; Proptech ($426.2 million across five deals) and artificial intelligence (AI) and machine learning ($204 million across eight deals.)
Dr. Angeli Möller, Alliance for Artificial Intelligence Vice-chair and Roche, Head of Digital Integrations Generating Insight at Roche, says that when it comes to AI and machine learning, there’s an impact to be made.
“Driven by an increased awareness of the devastating human and economic impact of a global pandemic, I expect investments in AI and machine learning to significantly impact remote, fast, automated and low-cost screening for infectious diseases in 2023,” said Möller.
Rafael Rosengarten, CEO of Genialis says that AI and machine learning play a central role in advancing us closer to the goal of outcomes-based care. “We think this will happen through a combination of more personalized medicines and more accurate and broadly applicable diagnostics,” said Rosengarten.
Paul Condra, Head of Emerging Technology Research at Pitchbook, said the world’s most successful VC investors continued to decrease their early-stage investment activity but are still putting historically high levels of capital to work relative to trends before 2021.
“It was surprising to see the level of investment that continued to pour into the crypto sector in Q3 despite the pullback in crypto trading activity,” said Condra.
While ETI deal value represented 12.7% of all seed and early-stage VC investments in the Pitchbook report, large ETI deal value is starting to return to normal levels with ten deals of $100 million or larger in Q3.
“I expect the FTX implosion to lead to a dramatic pullback in crypto investing, but the space has been incredibly resilient all year,” added Condra.
Condra said that Pitchbook recorded very few deals from investors focused on green or climate-related themes. “This has been a common trend for several quarters despite the growing popularity of climate-related technologies and could reflect how the space tends to attract more non-traditional VC investors,” said Condra.
Condra said disclosed VC exit values have evaporated, with only $119.2 million recorded in Q2. He added that the IPO pipeline for IoT security specialists may open in 2023, and the category continues to face consolidation through M&A.
The health tech and wellness segment generated the fourth most significant amount of ETI deals in Q3, with nine deals raising $157.9 million. According to the report, telehealth services captured most of the tech deal activity. Homeward, a telehealth primary care provider in rural communities in the United States, raised $50 million in Series B funding in Q3.
Biotech saw the third largest amounts in deal flow. “The biotech space has also been very resilient and reflects the a-cyclical nature of the industry,” said Condra.
Startups focused on cancer and oncology opportunities raised significant rounds. In Q3, IDRx closed the largest biotech deal of the quarter in an over-subscribed $122 million Series A led by Andreessen Horowitz (a16z) and Casdin Capital. The Massachusetts-based company develops precision-based combination treatments that target tumors and secondary targeting molecules to stop mutations that may allow the tumor to evade specific therapies.