Today: Apr 17, 2024

Startup funding slump: 2023 sees lowest global investments in 5 years.

3 months ago

TLDR:

– Global startup funding in 2023 reached its lowest level in five years, with a 38% decline year over year compared to 2022.
– Funding cuts were seen across all stages, with early-stage funding down more than 40% and seed funding down just over 30%.

A slower final quarter in 2023 led to a lackluster year for global startup funding, marking the lowest level of venture funding since 2018, according to Crunchbase data. Total global startup investment in 2023 reached $285 billion, a significant decline of 38% compared to the $462 billion invested in 2022. Funding cuts were experienced across all stages, with early-stage funding down more than 40%, late-stage funding down 37%, and seed funding down just over 30%. Despite the decline, overall funding in 2023 was down less than 20% compared to the pre-pandemic years of 2018 to 2020.

The US market mirrored global trends, with funding to US-based startups totaling $138 billion in 2023, down 37% year over year. AI was the only sector to show an increase, with global funding to AI startups reaching close to $50 billion, up 9% from 2022. The largest fundings in 2023 went to foundation model companies OpenAI, Anthropic, and Inflection AI, which collectively raised $18 billion. Web3, consumer, financial services, e-commerce, shopping, and media and entertainment sectors all experienced declines in funding in 2023.

The fourth quarter of 2023 marked the lowest quarter for global venture funding, totaling $58 billion, down 24% quarter over quarter and 25% year over year. Seed funding totaled $7 billion in Q4, down just over 20% year over year from $9 billion. Early-stage funding declined the most in 2023 compared to other funding stages, with Q4 early-stage funding at close to $23 billion, down 32% year over year. Late-stage funding in Q4 was 25% of the volume of the peak in Q4 2021.

Overall, the funding environment in 2023 favored funds more than startup founders, with investors deploying capital with greater caution and higher standards. The venture markets are expected to continue to be tough for founders in 2024, with a lack of exits and a more disciplined funding landscape.