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Venture Capital Expected to Drop after the 2021 Boom, but Remains at Historic Levels

December 14, 2022

By Vanessa Behrens (WIPO) and Sacha Wunsch-Vincent (WIPO)

The question on the minds of innovators and innovation policy-makers is whether venture capital (VC) will dry up in 2022?

After experiencing unseen VC growth in 2021, the fear is that tighter monetary conditions will lead to VC declining strongly again, and in particular its influx to underserved regions, such as Latin America and Africa.

That would be a pity, as a lack of VC financing can lead to underinvestment in innovation (see the GII 2022 Special Theme); firms which were initially backed by VC have developed many of the modern world’s most useful innovations.[1]

Video: Venture Capital

Based on incomplete data for 2022 - provided by our GII collaborator Refinitiv - we show that VC is still holding up strongly by historic standards (compare 2022 to any year prior to 2021 in figures 1 or 2 below), but that the year-on-year growth rate cannot live up to the exceptional 2021 VC boom year.


Despite the pandemic, venture capital in 2021 boomed to a historic peak!

Despite the COVID-19 pandemic, the number of VC deals grew by 46% between 2020 and 2021, as compared to 7% between 2019 and 2020 (see the GII Global Innovation Tracker).[2] This marks a growth rate that is 10 times larger than the average annual growth rate of 4.3% over the previous decade (2010-2020).[3]

In total, USD 618 billion flowed into VC deals across the globe in 2021, with a year on year growth rate of 125% - a magnitude last seen just before the dotcom bubble burst (see figure 2).

Latin America and the Caribbean (+100%, or a doubling) and Africa (+75%) witnessed the strongest growth in deal numbers, albeit from a low starting point. VC investments more than quadrupled in Africa and Latin America to USD 3 and 16 billion, respectively.

The VC growth in 2022 will decline severely as compared to 2021, but 2022 VC deal numbers and values are holding up to historic heights; Africa sees strong growth

VC levels, both in terms of deal numbers and values, will remain strong in 2022, while VC growth will decline severely relative to the exceptional 2021 VC boom year.

The good news is that all VC deals approved worldwide so far in 2022 (13,700) already outpaced the number of deals concluded in each individual year of the last 10 years (10,500 deals a year on average), except 2021 (19,000 deals) which was an outlier in terms of unusually large VC activity (see figure 1). Once the 2022 data is complete, it is likely that VC deals will be near levels seen in 2021 or may even slightly outpace it (see figure 1).[4]

That said, it is practically certain that the year-on-year growth seen in the 2021 VC boom – the 46% mentioned above and shown as the pink line in figure 1 - will remain unmatched in 2022.

Figure 1: Number of VC deals received and year on year growth, by region


A similar trend is observed for VC value: USD 295 billion worth of VC investments have already been sealed worldwide in 2022 – and while the year is not over, it has already surpassed the USD 260 billion of VC investments received in 2020. Deviating from the trends in VC deals however, the value of VC investment is likely to remain substantially below the peak seen in 2021 (USD 595 billion), see figure 2. Depending on the how fast monetary tightening translates into money shortages in the third and fourth quarter of 2022, the amount of dollars invested in VC, could still see a sharp decline in 2022 relative to 2021 (see figure 2).

Aside from the potential for a VC slowdown, some positive regional news remains, in particular for Africa. By comparing only complete data (i.e. the first half, H1 of 2022 compared to H1 2021), we observe that the number of deals increased in three regions: Africa showed the strongest growth (+45%), followed by Asia Pacific (+28%) and Europe (+15%). Yet, for H1 2022, Latin America and Northern America have seen a lower number of deals: -23% and -12%, respectively.

If one compares 2022 to 2020, and despite of incomplete data, all world regions already see an increase in deal value (except for Asia Pacific where it is on par). Again, this is particularly noteworthy for Africa, which already received triple the amount of VC investment in 2022 compared to 2020. Africa is also the only region where the VC value of the first half of 2022 has substantially overtaken that of the first half of 2021, increasing fivefold from USD 0.3 billion to USD 1.6 billion, during which all other regions have seen a decline.

Figure 2: Total value of VC investment and year on year growth, by region


Finally, 2022 is not over yet and the data is still incomplete. A full comparison of 2022 to 2021 and prior years will have to wait until March 2023. Stay tuned for this analysis in a few months and a fuller assessment in the GII 2023.

Background: The Global Innovation Index uses three VC indicators, which are obtained thanks to the collaboration between Refinitiv, an LSEG (London Stock Exchange Group) business, and the World Intellectual Property Organization (WIPO). Refinitiv’s private equity screener (Eikon) provides VC data on deal level, amount invested, as well as investor and recipient information, going back at least to 1995.