TLDR: Venture capital funding dropped 38% in 2023 amid a global economic slowdown

Venture capital investors have continued to hold back on spending in 2023, with global startup investment falling 38% overall, despite increases in the AI, insurance, semiconductor, and battery sectors. The slow final quarter of 2023 put the year on record as the lowest total for venture capital funding since 2018. Overall funding in 2023 was down by less than 20% compared to the pre-pandemic years of 2018 to 2020.

Key Points:

• Overall global startup investment in 2023 reached just $285 billion, a 38% decline from 2022.
• Venture capital funding in 2023 was the lowest total since 2018.
• AI was the largest sector to show a positive increase, with global funding reaching close to $50 billion.
• Bright spots in funding were seen in the insurtech, semiconductor, and battery technology sectors.

Summary:

Venture capital investors have continued to hold back on spending, according to a fourth quarter report from investment data provider Crunchbase that called 2023 “a lackluster year for global startup funding.” The slow final quarter put 2023 on record as the lowest total for venture funding since 2018, Crunchbase said.

Specifically, global startup investment in 2023 reached just $285 billion, marking a 38% decline year over year, down from the $462 billion invested in 2022. However, through a broader scope, overall funding in 2023 was down by less than 20% when compared to the pre-pandemic years of 2018 to 2020.

The slump comes two years into a global economic slowdown, as venture markets are still reckoning with the funding boom of 2021, the report said. Signs of that droop visible since the beginning of 2022 include a fall in tech stocks, a slowdown of the IPO market, layoffs across the tech sector in 2023, and corporate valuations set in 2021 that did not hold up in 2023. More than 191,000 workers at U.S.-based tech companies were laid off in mass job cuts in 2023, Crunchbase records show.

The U.S. — the largest startup investment market, with about half of all venture funding — mirrored those global trends, as funding to U.S.-based startups in 2023 totaled $138 billion, down by 37% year over year.

One bright spot in that gloomy picture was artificial intelligence (AI), which was the largest sector to show a positive increase over the same period. Global funding to AI startups reached close to $50 billion last year, up 9% from the $45.8 billion invested in 2022. The largest fundings in 2023 went to the companies OpenAI, Anthropic, and Inflection AI, which collectively raised $18 billion in 2023. Smaller increases in investment also went to the insurtech, semiconductor, and battery technology sectors.