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January 6, 2024
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nullSteep Decline: Venture Market Slows as Funding and Deals Plunge”

TLDR:

  • The venture market is experiencing a downturn, with dealmaking and funding totals reaching six-year lows in 2023.
  • Venture funding fell to $248.4 billion in 2023, the lowest level since 2017, and global deal volume dropped 30% year-on-year to 29,303, a six-year low.
  • Fintech and retail tech sectors saw modest funding gains in Q4 2023.
  • The US venture market saw a decline in deal volume, with just 2,182 equity deals in Q4 2023, the lowest quarterly level since 2013, and a decrease in late-stage deal size.
  • The number of VC-backed IPOs globally in 2023 was the lowest since 2013.
  • In Q4 2023, generative AI and sustainability tech companies dominated top deals.
  • The global venture downturn saw funding fall 42% to $248.4 billion, marking the first time annual venture-backed funding slipped below the $250 billion mark since 2017.
  • The US, Asia, and Europe all experienced funding declines in Q4 2023.
  • US equity deal volume reached a 10-year low in Q4 2023.
  • US venture investors are shifting their portfolios towards early-stage companies.

The venture market is in a downturn, with both dealmaking and funding reaching their lowest levels in six years in 2023, according to a report by CBInsights. Venture funding fell to $248.4 billion in 2023, the lowest level since 2017, and global deal volume dropped 30% year-on-year to 29,303, marking a six-year low in dealmaking. While most major global regions and sectors experienced declines, the fintech and retail tech sectors saw modest gains in funding in Q4 2023.

The US venture market weathered a decline in deal volume, with just 2,182 equity deals in Q4 2023, representing the lowest quarterly level since 2013. Additionally, late-stage deal size decreased by over 50% since 2021, with the median late-stage deal size now at $21 million, compared to $50 million in 2021. The number of VC-backed IPOs globally in 2023 was the lowest since 2013.

Generative AI and sustainability tech companies were the focus of top deals in Q4 2023. Investors are showing interest in generative AI developers, as they are expected to provide long-term returns. The global venture downturn saw funding fall by 42% to $248.4 billion, which is 8 percentage points more than the previous year’s decline, marking the first time annual venture-backed funding slipped below the $250 billion mark since 2017.

Funding declines were observed across major regions in Q4 2023, with the US, Asia, and Europe experiencing double-digit percentage decreases. However, funding in the US fell further than in other major regions since the start of Q1 2023. While the US led in global deal share in Q4 2023, its share decreased compared to the previous quarter, while Asia and Europe gained a few percentage points. US equity deal volume reached a 10-year low in Q4 2023.

In response to the venture downturn, US venture investors have become more selective, shifting their portfolios towards early-stage companies. Early-stage deal share reached a recent high of 65% in the US, and in Silicon Valley, this level reached 74%, representing roughly three out of four deals. Silicon Valley continues to dominate US deals, accounting for over 20% of US deals each year for the past decade, though its share has slightly decreased over time.

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