Even like Y Combinator Unveils the latest startups in its lineup this winter, and we have bad news for founders: The global venture capital market shrank in the first quarter of 2023, and it could have been worse if there hadn’t been a few mega deals, according to Crunchbase (disclosure) : previous employer) and PitchBook reports. And here in the US, things are bleak.
Startups aren’t the only ones suffering either. Venture capitalists also see their ability to raise money hampered by absorbing a slew of start-up bad deals from the last boom and scarce exit volume.
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This decline in funding suggests to venture investors that the current downturn in startup investment may not turn its tide any time soon.
The exchange will soon get feedback on what appears to be a growing group of startups that may be the first to follow IPOs when the market reopens. But for now, we’re stuck looking for cash flow inside startup, not the other way around.
There’s a bit of good news to be found in this first quarter data, but don’t let that put you off. The numbers aren’t great, sure, but they aren’t completely As bad as we feared we headed into 2023 last year. Onwards!
Global investment capital declined during the first quarter of 2023
Crunchbase data shows that total startup funding in the first quarter globally fell to $76 billion from $162 billion a year earlier. Given that early 2022 wasn’t far from the peak of the last startup cycle, this comparison is somewhat misleading: We all know things have slowed down since then.
Zooming in, the total value of startup investment in the first quarter of 2023 was up 1% compared to the fourth quarter of 2022, which is a more recent and therefore more useful comparison. What’s up is good, right? Why care about lows if adventure totals no longer point to Earth?
Here’s how my old friend and former collaborator Gené Teare described the nuance in the first quarter numbers, writing that small gains in the first quarter total dollar include:
“A $10 billion investment in OpenAI — mostly from Microsoft — and a $6.5 billion round for payments giant Stripe. Without those two big deals, venture funding in the first quarter would have fallen even further, closer to $60 billion.”