A slower final quarter ended a lackluster year for global startup funding as venture capital investors continued to hold back in 2023, Crunchbase data showed Thursday. According to the statement, global startup investment in 2023 reached $285 billion — marking a 38 percent decline year over year, down from the $462 billion invested in 2022.
Key points:
- Global startup investment in 2023 reached $285 billion, down 38% from the previous year
- Early-stage funding was down over 40% while late stage was down 37%, and seed funding was down over 30%
- Artificial intelligence (AI) startups received close to $50 billion in funding, up 9% from 2022
- Manufacturing and cleantech startups saw declines of less than 20% in funding
- Web3 funding fell 73%, while financial services, e-commerce, and media and entertainment all saw significant declines
- Fourth quarter funding reached $58 billion, down 24% quarter over quarter and 25% year over year
Crunchbase noted that the fall in tech stocks and a slowdown of the initial public offering (IPO) market since the beginning of 2022 has tempered the industry. It also said valuations set in 2021 did not hold up in 2023, as promising companies raised flat and down rounds. Startups have navigated a tough funding environment, tightened their belts, and focused on unit economics. Layoffs across the tech industry have deepened in 2023.
While most industries saw declines in funding, artificial intelligence (AI) startups received close to $50 billion, up 9% from 2022. Funding for manufacturing and cleantech startups declined by less than 20%. Web3 funding fell 73% compared to the previous year. Other sectors that saw significant declines include financial services (down over 50%), e-commerce and shopping (down 60%), and media and entertainment (down 64%).
The fourth quarter marked the lowest quarter for global venture funding in 2023, with quarterly funding totaling $58 billion, down 24% quarter over quarter and 25% year over year. Seed funding declined just over 20%, while early-stage funding declined 32% compared to the previous year. Late-stage funding in the fourth quarter was 25% of the volume of the peak in the fourth quarter of 2021. Funding at this stage fluctuated throughout 2023 as large fundings went to AI, semiconductor, battery, and clean energy companies.
With the increased number of companies funded in recent years and the tighter funding markets, Crunchbase expects more companies to close in 2024. The venture markets got more disciplined in 2023, but without a bump in exits, founders may continue to struggle in a funders market.
Overall, 2023 saw a significant decline in global startup funding, with investors holding back and cutbacks deep across all funding stages. However, sectors like AI and manufacturing experienced some resilience, while others, like Web3, saw steep declines. The fourth quarter of 2023 marked the lowest point of the year for funding, and the future outlook remains challenging for founders in a funders market.
