Dive Brief:
- Finishing a year of heightened inflation and interest rates, e-commerce ended the fourth quarter with 77 venture capital deals globally amounting to $1 billion in total deal value, according to the Q4 2022 E-Commerce Report from markets research company PitchBook. Deal value fell in Q4 by 42.1% compared to the third quarter, but the number of deals increased by over 50%.
- Compared to 2021, deal count in Q4 declined by 25.2%, while the deal value for the quarter decreased 59.7% year over year. Both deal count and value declined in 2022 overall, with 2021 seeing $12.6 billion in value versus $8.8 billion last year.
- Exits during the quarter were down compared to Q3, totaling five exits versus seven, per the report. Last year yielded $1.5 billion in exits across 23 deals overall. This compares to a total exit value of $1.1 billion in Q4 in 2021, nearly reaching 2022's full year total.
Dive Insight:
2022 brought on a slew of macroeconomic challenges that trickled through the end of the year, all of which impacted the e-commerce landscape.
“Volatile international markets, elevated interest rates, and investor emphasis on profitability all contributed to the QoQ regression,” PitchBook’s report, with analysis from Eric Bellomo and data from TJ Mei, said. “While the COVID-19 pandemic fueled step-function growth in digitization and e-commerce adoption, merchants are observing a return to prepandemic growth rates, rising acquisition costs, and persistent recession risk.”
PitchBook’s report noted that rising customer acquisition costs and challenges brought on by Apple’s iOS 14 privacy changes have opened the door to innovation and pushed investors to look for “category-defining” companies.
During the fourth quarter, the largest early-stage venture capital deals included $40 million with Egyptian company MaxAB and $27.5 million for payments tech platform Butter. For later-stage companies, the largest deals were $114.6 million for reverse shipping brand Loop Returns and $109.8 million for the payments platform ConnexPay.
PitchBook’s analysis found emerging opportunities in two sectors.
The digitization of B2B buy now, pay later holds potential as consumer-facing BNPL growth slows, per the report. With B2B interactions often being more capital intensive, a smooth BNPL experience could help businesses stay operational amid inflation and increased interest rates.
Re-commerce also has growth potential, according to PitchBook, thanks to its greater affordability for customers and growing consumer expectations regarding sustainability. Investors may look to improve the digitization of such secondary marketplaces which are known for “significant fragmentation and data-quality issues.”
