The year 2023 proved to be a challenging one for tech startups and venture capital (VC) firms. The industry experienced a downturn marked by layoffs, shutdowns, and a decrease in funding. Several factors contributed to this downturn, including interest rate hikes by the Federal Reserve, slowing consumer spending online, and an oversaturation of funds going to startups with unstable business plans. Silicon Valley Bank’s failure in March only added to the challenges. As a result, fundraising figures for the year saw a significant decline. In Massachusetts alone, startups raised $12.6 billion through three quarters, down 26% from the same period in 2022 and 49% less than the first three quarters of 2021. Local VC firms were also on track to raise less than $7 billion, a 40% decrease from 2022 and the lowest total since 2018.
In recent weeks, the industry has seen the aftermath of this slowdown. OpenView Venture Partners, a Boston-based VC firm, laid off half of its staff in December despite raising a new fund earlier in the year. The firm cited a lack of leadership as the main reason for the layoffs. Another firm, Accomplice, saw one of its cofounders depart, leaving only one remaining founder. Layoffs also hit Visible Hands, a VC firm specializing in supporting underrepresented founders, as they struggled to raise funding in a difficult market.
One notable startup affected by the downturn was Superpedestrian, an electric scooter maker based in Cambridge. After a decade of focusing on the “micromobility” market, the company is closing its US operations and looking to sell its European business. The decline in investor interest and the bankruptcy of rival company Bird contributed to Superpedestrian’s decision to cease operations in the US.
