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AI Was Q2’s Big Hope To Reverse The Global Venture Funding Slowdown. It Wasn’t Enough

Illustration of Global-labeled piggy bank on an inclined plane.

Startup investors globally continued to scale back their pace in the second quarter of 2023 despite large funding and M&A deals in the artificial intelligence space.

Global venture funding in Q2 2023 fell 18% quarter over quarter to $65 billion, Crunchbase data shows. That’s down 49% compared to the second quarter of 2022, when startup investors spent $127 billion.

The first half of 2023 is down by similar proportions. In H1 2023, global funding reached $144 billion, marking a 51% decline from the $293 billion invested in H1 2022 and a 10% decline from the second half of 2022.

The slowdown happened despite three notable events in H1: Large rounds to AI-driven companies led by corporate investors Microsoft, Nvidia and Google alongside venture firms; the billion-dollar acquisition of language model training platform MosaicML by data warehouse company Databricks; and the precipitous stock market climb of Nvidia, whose chips power much of the computing to train large language models.

Nearly a fifth of total global venture funding so far this year has come from the AI sector alone, per Crunchbase. It’s safe to say that without the AI fervor kicked off by the launch of OpenAI’s ChatGPT in November, venture funding so far in 2023 would have been even lower.

Dollars and deals decline

Crunchbase data shows that we are now four to five quarters into the current funding decline. Since Q3 2022, each quarter’s global funding total has dropped by more than 45% year over year.

Deal volume is down significantly year over year as well, but not by quite as much as funding amounts. Still, deal volumes are down 37% year over year, with each stage posting a decline of more than a third.

More than 6,000 startups raised funding this past quarter, compared to more than 9,500 for the same time period a year ago.

Late-stage funding

Late-stage funding, the most impacted stage during the downturn, totaled $31 billion in Q2 2023 — the lowest quarter on record since 2018. That includes corporate rounds and private equity to venture-backed companies.

Q2 funding amounted to less than half of the $68 billion from a year ago. The number of late-stage companies funded was down 40% from a year earlier.

During the peak market of 2021, late-stage funding neared or surpassed $100 billion each quarter.


Early-stage funding reached $27 billion in the second quarter — down 45% from the $48 billion invested in Q2 2022. Deal counts were down 35%.

This is the lowest funding quarter to early-stage companies since 2021. In total, only around 1,200 companies raised a Series A or B funding last quarter. That compares to more than 2,100 for the same period a year ago.

Seed funding

Seed-funded startups raised $6.8 billion in Q2 2023, down 39% from the $11.2 billion invested a year earlier for the same time period.

This is the lowest quarter of seed funding to startups since 2021. All told, more than 1,500 companies raised a seed round of $1 million or more in the second quarter compared to around 2,500 for the same time period last year.


Companies categorized as AI in Crunchbase raised $25 billion in the first half of 2023, representing 18% of global funding. That includes the $10 billion funding to OpenAI led by Microsoft in January. While that’s down from the $29 billion invested in H1 2022, by comparison it is higher as a proportion of total funding.

Machine-learning startup Inflection AI alone raised $1.3 billion last quarter. Other AI companies that raised large fundings in the second quarter included Anthropic, CoreWeave, OpenAI, Cohere,, and Runway.

Companies in sectors outside of AI also raised large rounds, including China-based fast fashion retailer Shein, Germany-based solar and smart electricity company 1Komma5°, and Sweden-based battery manufacturer Northvolt.

Company closures

The new scaled-back venture funding environment adversely impacts companies that have raised funding since 2021’s very hot market.

Companies that raised in recent years have slashed costs since 2022 — notably by cutting jobs — to increase runway.

In this slower funding environment, many more companies are also struggling to progress from a sizable ($1 million or more) seed round to their Series A funding, Crunchbase data shows. It’s also taking longer to raise a Series B funding round after securing a Series A.

The predicament for many startups only compounds as their customers continue to scale back, further impacting those companies’ growth. That, in turn, makes it even more difficult to raise much-needed new funding.

As startups run out of options, expect more companies to outright shut down in the second half of 2023 and into 2024.


The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of July 3, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

We have made a change to how we include corporate funding rounds in our reporting as of January 2023. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round.

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Illustration: Dom Guzman

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