KPMG, one of the Big Four accounting firms, recently released the "Venture Capital Pulse: Global Venture Capital Analysis" report for the second quarter of 2024, analyzing the latest trends in global venture capital from a global and regional perspective. The report mentioned that current venture capital investments focus on artificial intelligence, clean technology and defense technology.
LLMs development costs are extremely high, and AI themes are still the main focus
In the second quarter of 2024, the AI theme will still be the focus of global venture capital. Companies such as CoreWeave, xAI, Mistral AI, and DeepL have all received large investments, partly because of the extremely high development costs required to develop and provide large language models (LLMs) and artificial intelligence models. Huang Haining, the lead accountant of KPMG Anhou Jianye’s innovation and new startup service team, said that some investors have begun to focus their investment on new startups with truly unique AI value propositions, rather than broad investment. In addition, the regulatory trend of artificial intelligence will also affect the development of the industry and the investment direction of venture capital. For example, the recently effective EU Artificial Intelligence Act (EU AI Act) and its regulations have affected investors’ investment attitudes towards new ventures. .
(The world's first AI legislation, the European Union officially passed the Artificial Intelligence Regulation Act "AI Act")
AI technology drives demand for defense technology
The development of AI technology has also intensified people's demand for security protection. For example, face-changing can break through facial recognition. In response to these emerging threats, investment in new security startups is expected to increase significantly. In addition, venture capital’s interest in defense technology continues to increase. In the United States, there are some defense technology companies that have grown to the point where they can compete with industry giants. And this trend is not limited to the United States. Small defense technology innovations are also springing up in Australia, India, the United Kingdom and other regions. While there has yet to be a wave of consolidation in this space, the next year or two is likely to see a handful of large defense technology companies go public, while smaller start-ups become targets for acquisition by larger companies.
Energy and clean technology remain the focus of transformation
In an environment where ESG is gradually becoming mainstream, venture capital investment in the energy and clean technology fields is still strong. For example, China's electric vehicle Nezha Auto raised US$693 million, and Nexamp, an American company focusing on decarbonization, raised US$520 million. U.K.-based energy storage company Highview Power raised $382 million. Huang Haining said that in view of climate change and the rise of sustainability awareness, alternative energy and clean technology may still be a priority for investors, and this trend continues to be bullish in most regions.
Looking forward to 2025, geopolitical uncertainty will still be the main reason
The report mentioned that from a regional perspective, the amount of venture capital investment in the Americas and Europe has increased. Venture capital investment in the Americas climbed to $58.3 billion, an eight-quarter high, while Europe rose to $17.8 billion from $13.9 billion. In Asia, overall venture capital investment in Asia fell to a seven-year low of $17.4 billion, mainly due to the ongoing economic slowdown in China, despite increases in other regions such as India, Singapore and Japan.
Looking ahead to the third quarter, global venture capital remains relatively stable, although there may be more mega-deals above $100 million. Looking at the U.S. market, although fundraising activities are overall weak, funds focusing on the AI field may buck the trend and grow. The European market also faces some challenges, such as slowing economic growth and geopolitical uncertainty. Despite this, the outside world is still optimistic that the European IPO market may show some new signs in the third quarter of 2024, such as in response to the upcoming Digital Operational Resilience Act (DORA). More regulatory technology is likely to be in the spotlight. In Asia, China's venture capital investment will remain sluggish in the second quarter of 2024. Although it may rebound in the future, it may not reach the level of the first quarter. With a stable political and economic environment in India, venture capital investment is expected to grow. Japan’s venture capital market is expected to remain stable, but growth-stage financing challenges remain.
This article KPMG quarterly venture capital report is out! When can the venture capital market see the light of day? First appeared in Chain News ABMedia.