Despite having record levels of dry powder, venture capital firms are still writing small checks. According to a report by PitchBook, the average venture capital deal size in the first quarter of 2023 was $12.4 million, down from $13.8 million in the fourth quarter of 2022.

There are a few reasons for this trend. First, venture capitalists are being more selective about the companies they invest in. They are only investing in companies with strong teams, clear product-market fit, and a large addressable market. Second, venture capitalists are concerned about the rising valuations of startups. They are hesitant to write large checks for companies that are already valued at high multiples of revenue.

The trend of small checks is likely to continue in the near future. Venture capitalists are still cautious about the market, and they are not willing to take on too much risk. However, as the market stabilizes, we may see venture capitalists start to write larger checks again.

Here are some additional details about the trend of small checks in venture capital:

  • The average venture capital deal size in the first quarter of 2023 was $12.4 million, down from $13.8 million in the fourth quarter of 2022.
  • There are a few reasons for this trend, including the rising valuations of startups and the increasing selectivity of venture capitalists.
  • The trend of small checks is likely to continue in the near future, as venture capitalists remain cautious about the market.
  • However, as the market stabilizes, we may see venture capitalists start to write larger checks again.

What does this mean for startups?

The trend of small checks means that startups will need to be more resourceful and efficient with their capital. They will need to focus on building a strong product-market fit and generating early revenue, as this will be important to attract future investment. Startups will also need to be more creative in their fundraising strategies, as they may not be able to raise large sums of money from venture capitalists.

What does this mean for venture capitalists?

The trend of small checks means that venture capitalists will need to be more selective about the companies they invest in. They will need to focus on companies with strong teams, clear product-market fit, and a large addressable market. Venture capitalists will also need to be more patient, as it may take longer for their investments to mature.

Overall, the trend of small checks in venture capital is a sign of the cautious market conditions. However, it is also a sign that venture capitalists are still active and looking for good investment opportunities.