VC activity in D.C. region rebounds with massive raises
Nationwide, venture capital activity remained lackluster in the final three months of 2023 — a bummer of a year for the industry overall — but the D.C. region fared pretty well thanks to mammoth raises by two local companies.
There were 58 venture capital deals in Greater Washington in the fourth quarter, fewer than the 74 deals in the same period in 2022, but dollar volume nearly quadrupled year over, from $570 million to $2 billion, according to a quarterly report released Thursday by data analytics firm PitchBook and the National Venture Capital Association.
Nationwide VC deals drop, but D.C. bucks the trend
Nationally, the number of VC deals dropped to 2,879 in the quarter from 3,717 in the final quarter of 2022, while the aggregate value of those deals fell 5.8% year over year, to $37.5 billion.
It was a similar story for the full year. The number of VC deals in Greater Washington fell from 365 in 2022 to 307 last year, but the total amount invested climbed 11%, to $5 billion. Nationally, the number of VC deals plunged year over year from 17,592 to13,608, while the aggregate dollar value fell 30% to $170.6 billion.
Slowdown in VC sector continues for second year
It marked the second straight down year for the sector following record deal activity in 2021, when VC investment in the U.S. topped $345 billion. The slowdown is being driven by a combination of global unrest, high-interest rates, and general economic uncertainty, though Bobby Franklin, NCVA’s president and CEO, noted that some sectors continue to attract meaningful investment.
“IFrom interest rates to foreign conflict, the world looks very different than it did two years ago, and a new set of problems needs to be solved for,” Franklin said in Thursday’s report.
Franklin pointed to AI, life sciences, and clean tech as “all attracting significant levels of public and private investment” and to manufacturing as an area that’s ripe for greater investment as the U.S. looks to “de-risk existing supply chains and power the green transition.”
AI, life sciences, and clean tech attract significant investment
That’s reflected in one of the two biggest deals our region saw this past quarter. Rockville-based X-Energy raised a $235 million Series C round to further its work engineering small nuclear reactors and fuel technology, after it called off plans to go public via a merger with a blank-check company — an affiliate of investment firm Ares Management — due to “challenging market conditions.” The investment was led by some of Ares’ executives.
Rockville-based X-Energy raises $235M for nuclear technology
More than half of the $2 billion local companies hauled in last quarter was raised by e-cigarette maker Juul Labs, which relocated its headquarters from San Francisco to D.C. in 2020 to be closer to federal regulators. The company raised $1.3 billion in November out of a $1.6 billion offering, Reuters reported — just a few months after it paid a $462 million settlement to six states and D.C. last spring after they alleged that Juul was illegally marketing to minors.
Juul, which had been on the verge of bankruptcy in 2022, hasn’t said what it will use the funding for.
Other companies that raised major sums of money in our region were D.C. cybersecurity company Adlumin, which raised a $70 million Series B round, Bethesda hotel technology firm Stayntouch, which cinched a $48 million equity investment, and roadside assistance firm Urgent.ly (NASDAQ: ULY) which went public via a reverse merger, raising $84.7 million.
Analyst comment
Positive news: VC activity in D.C. region rebounds with massive raises.
Short analysis: The D.C. region had a strong performance in venture capital activity, with the number of deals decreasing but the dollar volume quadrupling in the fourth quarter. This bucks the nationwide trend of a drop in VC deals and aggregate value. The slowdown in the VC sector is being driven by various factors, but certain sectors like AI, life sciences, and clean tech are still attracting significant investment. Overall, the D.C. region is likely to see continued growth and investment in the coming months.
