Venture Capital Investment Market Assessment, By Sector [Software, Pharmaceutical and Biotech, Media and Entertainment, Medical, IT, Consumer Goods and Recreation, Energy, Others], By Fund Size [Under USD 50 Million, USD 50 Million to USD 100 Million, USD

Venture Capital Investment Market Assessment, By Sector [Software, Pharmaceutical and Biotech, Media and Entertainment, Medical, IT, Consumer Goods and Recreation, Energy, Others], By Fund Size [Under USD 50 Million, USD 50 Million to USD 100 Million, USD 100 Million to USD 250 Million, USD 250 Million to USD 500 Million, USD 500 Million to USD 1 Billion, Above USD 1 Billion], By Funding Type [First-Time Venture Funding, Follow-on Venture Funding], By Region, Opportunities and Forecast, 2017-2031F

Global venture capital investment market is projected to witness a CAGR of 19.25% during the forecast period 2024-2031F, growing from USD 271 billion in 2023 to USD 1108.25 billion in 2031F. Factors such as the increasing number of startups, industrialization 4.0, and globalization drive market growth. One significant trend is the increasing integration of technology to bring greater efficiency and improved product quality. Advanced technology such as artificial intelligence, machine learning, and blockchain are being utilized to create innovative products that surpass traditional alternatives.

Venture capital is a type of private equity where investors fund startup companies and small businesses with significant long-term growth potential. The venture capital market is fundamentally driven by the mutually beneficial relationship between investors looking for high returns and businesses needing funds. A high-risk tolerance, a long investment horizon, and a forward-thinking attitude to assisting portfolio firms are some of the key features of the venture capital fund market. The venture capital market is crucial in driving innovation and economic growth by providing funds for product development, business expansion, and job creation.

Technological Advancement and Innovation to Dive the Market Growth

Technological advancements are the major forces behind the rise in the venture capital investment market. In such a rapidly evolving world, technological breakthroughs occur regularly, allowing venture capitalists to explore untapped markets and disrupt conventional ones. New technologies such as AI, blockchain, machine learning, biotechnology, and energy solutions attract many venture capitalists.

In November 2023, IBM announced the launch of a USD 500 million venture fund to invest in AI companies, from early-stage to hyper-growth startups, focused on accelerating generative AI technology and research for the enterprise. The IBM Enterprise AI Venture Fund will invest in current and future AI leaders who are helping businesses worldwide realize the potential of AI for business. Being one of the most ground-breaking and revolutionary technologies, interest in AI, especially generative AI, remains strong. According to the India Venture Capital Report, funding for generative AI startups surged to USD 250 million in 2023 from USD 15 million in 2022. The potential for its widespread application across various sectors and industries along with adoption potential across c-suite is driving investment as the sector continues to develop.

Favorable Government Incentives to Drive the Market Growth

Government incentives have been a major driver of growth in both the venture capital and startup markets. The COVID-19 pandemic has significantly disrupted global supply chains, resulting in adverse impacts on startups. Major economies experienced recessionary trends, leading to diminished investor confidence and reduced funding allocations from venture capitalists. In response, many governments worldwide have been implementing tax incentives, grants, and other policies to bolster venture capital investment and foster startup growth. The increasing number of startups further fuels the venture capital market.

In 2023, China announced the extension of favorable taxation policies for venture capital firms and individual angel investors investing in tech startups. Under these policies, investors or investment firms that pick up a stake in a tech startup at the seed stage or early stage and stay invested for two or more years are allowed a deduction of 70 percent of their investment amount from their taxable income.

North America Dominated the Global Venture Capital Investment Market Share

North America is rapidly expanding and is expected to have a major proportion of the global venture capital market. Economic development, population growth, and an increased number of startups contribute to the market growth. The growing footprint of Silicon Valley in North America has boosted the market's growth. Due to its proximity to Silicon Valley, the technology industry, which includes the Internet, computer hardware and services, mobile, and telecommunications, receives most venture capital funding. The region has many unicorn firms, indicating a thriving startup culture and a strong investment climate. Both international and domestic investors actively participate in the competitive landscape, promoting innovation and growth across various industries.

Canada has emerged as a major player in the global venture capital market, making significant investments in ICT, medical sciences, and cleantech. Meanwhile, the United States remains a venture capital powerhouse, luring companies and investors due to its concentration of top investment banks and booming fintech sector.

Software to Dominate the Global Venture Capital Market Share

Software is the largest segment in the market due to its applicability across various industries. It includes application software, system infrastructure software, software as a service (SaaS), operating systems, database software, and analytics software. This segment helps curate products that provide solutions for higher efficiency, automation, and management of big data, catering to corporate entities and consumers alike. Venture capitalists have shown a strong interest in transformative technology such as artificial intelligence, machine learning, Internet of Things (IoT), CloudTech, and DevOps. The software sector is an ever-changing landscape, allowing new and old firms to take advantage of the dynamic market.

In 2024, Chamath Palihapitiya, the owner of a Silicon Valley-based venture fund, Social Capital, announced on social media the launch of 8090 which is a fully funded incubator, to help enterprise software startups get off the ground.

Investment of USD 500 million to USD 1 billion dominates the Market

The largest segment of the global venture capital market share is the range of USD 500 million to USD 1 billion in investments. This group often includes well-established companies pursuing ambitious growth, such as market dominance and prospective initial public offerings (IPOs). Venture capital firms, private equity investors, and institutional investors play significant roles in funding companies at this stage, supporting substantial expansion plans, R&D efforts, and merger and acquisition (M&A) activities.

In 2023, 43% of the IPOs were backed by venture capital investments, highlighting the important role they play in helping businesses expand.

Future Market Scenario (2024 –2031F)

The venture capital market exhibits signs of robust recovery following its downturn during the COVID-19 pandemic. It has begun to regain momentum, driven by rising consumer demand, technological advancement, and government incentives.

Initial public offerings (IPOs) are beginning to gain momentum in 2024, with renewed support from the venture capital market. IPOs provide venture capitalists with a valuable opportunity to realize returns on their early-stage investments.

Prominent industry players invest significantly to stimulate innovation and propel market growth. These investments primarily target the development of new products and the expansion of the supply chain.

With an increasing emphasis on sustainability and reducing carbon emissions, investments in the energy sector are expected to rise.

Key Players Landscape and Outlook

The key players in the venture capital investment market are focusing on the latest technological developments such as AI, ML, and blockchain to enhance efficiency and automation. Renewable energy and sustainable products are a major focus of these key players. Moreover, top players are seeking to tap undiscovered markets and invest in products that are in line with the changing consumer needs while keeping sustainability and environment, social, and governance (ESG) initiatives in mind.

Recently Accel launched a USD 650 million fund for Indian and Southeast Asian startups, underscoring the large pool of capital being deployed by funds as they follow high-growth organizations in the developing markets. Silicon Valley venture capital giants Lightspeed Venture Partners, Andreessen Horowitz, Sequoia Capital, and Tribe Capital have invested nearly USD 18 billion in Elon Musk’s xAI.