Venture capital deal activity in U.S. dropped to its lowest quarterly average since 2017 in the first quarter of 2024, according to a first-look report released ahead of the quarterly PitchBook-NVCA Venture Monitor scheduled to be released next week.

The first quarter in the U.S. is described as being relatively calm, with only $9.3 billion in venture capital raised, just 11.3% of the total raised in VC in 2023. The quarterly deal value was the lowest since 2017, but the report does note that a lack of outlier deals — large deals — skewed the number.

While the amount invested was low, it found that valuations on deals were slightly up at the median across several stages. The rise is attributed to relatively strong performances from public markets and a bias toward fundamentally strong companies’ continued ability to raise capital in the slow venture market.

Investors remain cautious in this environment because of continued uncertainties, such as ongoing inflation cutting the chances of interest rate cuts to the back half of the year and the possibility of a recession. As such, the report notes that deal activity is not expected to pick up in a meaningful way in the near term.

Exits in the first quarter were dominated by the initial public offerings of two companies, Reddit and Astera Labs Inc., on March 19 and 20. The two exits combined for 73% of the total exit value generated through March.

Two high-profile IPOs would arguably not make a trend, but the PitchBook report claims that they have “created buzz in the market narrative because of how slow exits have been for two years.” Though both IPOs went well, the report argues that there is still uncertainty as to the prospects moving forward.

That’s because market performance continues to be dominated by mega-cap tech stocks. Investor appetite for high-risk, money-losing companies that aren’t able to tell their story through the growth of artificial intelligence is noted as remaining low.

Merger and acquisition activity in the quarter remained extremely difficult for large companies and a majority of transactions were immaterial in size.

Europe, surprisingly, saw more VC investments in the quarter, with €16.4 billion ($17.66 billion) in deal value across 2,395 financings. Late-stage and venture growth-stage valuations declined marginally while seed and early-stage valuations have continued to show their strength thanks to their distance from public markets. The EU also saw €7 billion ($7.54 billion) in exit value generated in the quarter, with three exits generating more than €100 million in value.

Global VC deals — those outside Europe and the U.S. — saw $75.9 billion invested across 10,222 deals. Global exits came in at $30.7 billion, the lowest exit value since the fourth quarter of 2016.

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