After two years of record-high venture capital flows to startup companies, investors put the brakes on big investments this spring.

In Minnesota, the slowdown resulted in one of the lowest periods of capital raised by companies here in recent years. But local investors say the effects won't last long.

U.S. companies raised $144 billion from venture investors through the first six months of 2022, according to a report last week by Seattle-based investment research firm PitchBook. That's down from $158.2 billion in the first half of 2021.

Most of the latest money went to companies in California ($68 billion), New York ($18 billion) and Massachusetts ($12 billion). Minnesota companies raised $928 million.

There was a sharp slowdown in the April-through-June period. In that three months, Minnesota companies raised just $99 million. In the same three-month period of 2021, Minnesota companies raised $211 million. They raised $78 million in that period of 2020, during the onset of the global COVID-19 pandemic.

Across the country in the second quarter, companies got $62 billion of the $144 billion six-month total.

In Minnesota, there were 31 deals conducted in the first half of the year. That's on par with previous years except for 2021's record pace, when $2.7 billion was raised across 198 investments.

One of them was Minneapolis health benefits company Gravie, which recently announced an increase of its Series E financing round to $90 million, adding an additional $15 million from investors after closing on an initial $75 million in March of this year. The additional cash came from existing investors and puts Gravie at $161 million raised since its inception in 2013.

The vast majority of Minnesota companies raising capital from investors are considered early stage, meaning they need relatively small amounts of money.

Nationally, venture capital figures tilt around late-stage companies, which are close to going public or being acquired. Those firms have seen the biggest swings in valuations and capital flows.

"On the ground, especially in Minnesota and the Midwest, there never was a run-up on valuations, not to the extent of the scale on the coasts," said Ryan Broshar, a partner at Matchstick Ventures, a investment firm operated from Minneapolis and Boulder, Colo. "We never had big run-ups of two times the [valuation] to come back down from."

In the Midwest, Matchstick's territory also includes Wisconsin, Michigan, Illinois and Indiana, and the firm typically writes checks between $500,000 and $1.5 million as pre-seed and seed investments into startups.

In Broshar's view, seed and pre-seed deals in Minnesota are consistent with previous quarters, and valuations are as they always have been.

Other venture investors in Minnesota agree.

"You don't have the $25 million valuation with an idea on a napkin in Minnesota like you might see in Silicon Valley," said Brett Brohl, managing partner at Minneapolis-based Bread and Butter Ventures. "Those are the types of rounds that get affected first and go away first. Since we didn't have them to start, we're not going to lose them."

Minnesota's environment can be an advantage for entrepreneurs who are capital-efficient and less dependent on large sums of money to grow, he said.

"The change will be less drastic here than in other markets," Brohl said.

And with more than $230 billion in committed capital awaiting deployment from thousands of funds across the U.S., per PitchBook and the National Venture Capital Association, the well of money isn't drying up. The speed of the stream that fills it is just decreasing.

"It's not like that committed capital is going to go away," said Rob Weber, co-founder and partner at Minneapolis-based Great North Ventures. "It's just going to be pushed forward. Eventually what will happen is subsequent funds like ours are going to get harder to raise because people are feeling a little poorer right now."

Bread and Butter Ventures typically invests in one company every month. The firm isn't changing its schedule despite what's happening in the venture market, Brohl said.

"If you change based on macroeconomics, you might miss out on the next Airbnb," he said. "Great companies are built in every type of economy."

The founders of Minneapolis-based Brown Venture Group aren't slowing down either, with early-stage investments focused on startups led by Black, Latino and Indigenous entrepreneurs.

"We're actually speeding up," said Paul Campbell, co-founder of BVG.

BVP has a portfolio of 20 startups and could add as many as three more by the end of the month, Campbell said.

"What we're experiencing is more introductions and conversations at this point, not less" Campbell said. "We're seeing a pickup in activity, not a decline based upon the markets."

While the Minnesota investors are in a game of wait and see, they said they'll still pounce on attractive deals.

Nationwide, the venture capital industry is likely to see readjusted pricing in deals continue until "certainty returns to the market," experts said.

"Over the last quarter, the pace of fundraising has slowed sharply and valuations are beginning to correct," said Pamela Aldsworth, head of venture capital coverage at J.P. Morgan, in a statement referring mostly to late-stage companies. "We expect valuations will come down across all investment stages as this cycle plays out, and in our view, this is a healthy resetting of the bar."

To survive the moment, entrepreneurs dependent on venture capital should stretch their dollars.

"Be smart with your money and think of every investment, every hire, as a high ROI, and treat the capital as if you weren't able to raise any more money," Broshar said. "But if your company is growing and doing well, I wouldn't hold back for some reason other than what your customers indicate."