Why media investors are saying publishing company VC funding slowdown is a good thing

The venture capital market is slowing, but some investors are saying that’s a good thing — for them.

During the pandemic, VC money was getting thrown into the market and competing for opportunities for investment. Now, the VC market is correcting itself: company valuations are down, and less competition means smaller VC firms can be more deliberate with their investments. However, this also means it’ll be more difficult for media companies looking to raise capital to do so.

According to data from capital market research firm PitchBook, U.S. venture capital deal activity in “publishing” companies (defined as providers of print and internet publishing services, such as newspapers, magazines and books), was $25.2 million in Q3 2022, down from $84.4 million in Q3 2021 and $85.4 million in Q3 2020.

However, that’s up slightly from Q3 2019 at $25 million, but down from Q3 2018 at $85.3 million.

As for deal count, that’s also dipped in Q3 2022 to five deals in the quarter. In Q3 2021, there were 16 deals, and in 2020 there were 13 – the same number as in Q3 2019. It was 15 in 2018.

As of Nov. 1, 2022, the total value of VC deals for publishing companies this year was $117.4 million. While it’s not a complete comparison since there’s another quarter to go, total deal value was $484.5 million in 2021; $241.8 million in 2020; $511.6 million in 2019; and $208 million in 2018. Total deal count ranged from 51 in 2018 to 65 in 2021; it’s 35 so far in 2022.

The biggest U.S. VC deal among publishing companies in 2022 was a tie between news aggregator Flipboard’s $25 million Series A funding round led by K2 Global in July and Semafor’s $25 million seed round in June. Crypto publisher Decrypt raised $10 million in a Series A funding round in May. Lava Labs and Grid also raised $10 million this year.

After hitting a high in Q4 2021, global VC funding in Q3 declined 34% from the prior quarter, hitting a nine-quarter low, according to data from market intelligence firm CB Insights. The 34% quarter-over-quarter drop in Q3 was the largest percentage drop in a decade. However, Variety reported that despite this shrinkage, the technology, media and telecom (TMT) sector remained the top VC target.

Why this is “healthy” for the VC market

Kyle Stanford, lead VC analyst at PitchBook, said the slowdown is a “healthy” trend for the venture capital market, which was “overheated” in 2021.

Overall, Pitchbook’s data shows the VC deal count in Q3 2022 was 20% lower than the deal count in Q1 – but higher than any quarter before 2021, he said.

“The performance of the return to the VC market provided to investors over the past decade has brought so much capital so quickly into the market that what we saw in 2021 was kind of like the culmination of too many people chasing too few deals and the market hasn’t kept up with all that capital,” …read more

Source:: Digiday