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Temporary relief could come, structural exit issues notwithstanding

Are startups really in danger of suffering a protracted, painful slowdown?

With half the year now behind us, the gathering clouds for startups around the world don’t appear to have broken into storms, leaving us wondering if the market is really that bad today for venture fundraising, and therefore startup health.

There are other positive factors to consider: Employment growth in the critical U.S. market remains strong, the value of software stocks may have bottomed out, many startups are hitting plan and there’s plenty of dry powder in the market looking for a deal. Could we be set up for an H2 2022 startup recovery?

We’re not ready to make a formal prediction, but data and certain market dynamics could put startups in a pretty OK position in the back half of the year. Let’s talk about the bull case for startups for the rest of 2022.

A recovery?

According to PitchBook data that TC discussed earlier in the week, we are seeing venture capital activity slow from a hyperactive 2021. This was expected.

But it also reported that American venture capitalists alone have raised more than $120 billion in 2022 thus far. That puts Yankee private-market capital allocators on pace to smash the $138.9 billion they raised last year and utterly crush the $85.4 billion raised in 2020, a number that, while a record at the time, pales compared to the recent venture capital fundraising pace.