Last year saw the lowest level of startup funding in five years, witnessed valuations fall drastically, and offered little hope for IPO contenders. But is that all now in the rearview mirror? That’s certainly the hope from many of the startup investors and entrepreneurs we’ve spoken with recently, who say that even if things don’t come roaring back in 2024, they’re at least looking forward to a year of relative calm and predictability. With that in mind, let’s look at what’s happening in the startup world as seen through seven charts based on recent Crunchbase data.
TLDR:
- 2023 ended on the lowest note in five years for startup funding, with Q4 of 2023 having the lowest quarterly amount of venture spending in a year.
- Cybersecurity funding has been hit by the venture downturn, with only $8.2 billion invested into startups in the space globally last year, a five-year low.
- Seed funding has remained robust, with U.S. seed investment growing 10% in 2022 despite a decline of 31% in 2023.
- Funding for Web3 and metaverse-related startups has dwindled significantly, with investment dropping to less than $7 billion and less than $2 billion, respectively.
- Artificial intelligence startups raised close to $50 billion in 2023, making it the largest sector to show an increase.
- M&A dealmaking for venture-backed startups globally dropped by almost a third year over year in 2023, with buyers likely waiting for valuations to drop further.
Last year ended on a particularly low note for venture funding, with Q4 of 2023 seeing the lowest quarterly amount of venture spending in a year that itself had the slowest level of venture investment since 2018. Many investors predict that 2024 will be a year of stabilizing, with the valuation drops and year-over-year declines of the past two years becoming baked into the market. However, cybersecurity funding has not been unscathed by the venture downturn. Funding in the cybersecurity space has hit a five-year low, with only $8.2 billion invested globally last year, down from $23 billion in 2021. Seed funding has remained fairly robust, with U.S. seed investment growing 10% in 2022 and declining by a smaller percentage compared to other funding stages in 2023. The seed market continues to feel vibrant, although seed startups that raised in 2021 and are seeking fresh cash should expect their valuations to be trimmed or stay flat. Funding for Web3 and metaverse-related startups has drastically dwindled. Investment in Web3 startups was less than $7 billion in 2023, a significant drop from the $33 billion invested in 2021. Similarly, investment in metaverse-related startups was less than $2 billion in 2023, down from the more than $5.7 billion invested each year in 2021 and 2022. On the other hand, artificial intelligence (AI) startups raised close to $50 billion in 2023, making it the largest sector to show an increase. However, investors predict a cooling off in AI investment in 2024. Lastly, M&A dealmaking for venture-backed startups globally dropped by almost a third in 2023, with buyers likely waiting for valuations to drop further from their highs in 2021.
