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North American Startup Funding Fell Across All Stages In Q2

Illustration of N. America-labeled piggy bank on an inclined plane. [Dom Guzman]

The good times are not back for North American venture funding. 

Sure, there may be upbeat signs, like the mounting AI buzz and some resurgence in the IPO and M&A markets. But when it comes to the actual funding tallies, the totals are unequivocally trending lower.

How far down? For the second quarter of 2023, investors put $31.8 billion into seed- through growth-stage rounds for U.S. and Canadian startups, according to preliminary Crunchbase data. That’s by far the lowest quarterly total in more than three years.

For perspective, we chart out quarterly investment totals, color-coded by stage, for the past 10 quarters below:

Funding was down at every stage both quarter over quarter and year over year, with the most pronounced decline at later stages (Series C and beyond). In addition to putting less money to work, investors completed the lowest number of deals in two years, as shown in the chart below: 

Still, there were some large financings in the second quarter, including a $450 million Series C for generative AI platform Anthropic, and a $401 million Series D for gene therapy startup ElevateBio

Also, seed- and early-stage dealmaking saw relatively modest quarter-over-quarter declines, so the pipeline of fundable companies remains pretty robust.

For a more detailed sense of how the quarter and first half of the year played out, we break things out by stage below. We also take a look at exits, both M&A and IPOs, and contemplate where things are likely to go from here.

Late stage and technology growth

We’ll start with late stage, which typically gets the largest share of investment.

For Q2, North American startups pulled in $15.3 billion in late- and technology growth-stage financings1, per Crunchbase data. That’s a drop of 48% quarter over quarter and 54% year over year. 

The declines look less steep when we consider that the Q1 total included a huge and unusual transaction: the $10 billion Microsoft-backed round for OpenAI, which calls itself a “capped profit company governed by a nonprofit.” Without that deal, Q1 and Q2 totals would be much closer together.

Round counts also ticked up slightly in Q2. This indicates investors are slightly more open to consummating deals, albeit at valuations often far below the 2021 peak. 

For the bigger picture, we lay out total investment and round counts over five quarters below:

Investors also didn’t shy away from big rounds. Besides the two aforementioned financings for Anthropic and ElevateBio, other large funding recipients included drone operator Zipline ($330 million Series F), construction equipment marketplace EquipmentShare ($290 million Series E, and AI software provider Cohere ($270 million Series C).

Early stage

As venture investment contracted over the past several quarters, declines have been more pronounced at the late stage than the early stage. This seems logical, given that late-stage valuations are more driven by public market comps and the state of the IPO market. Early-stage investors, by comparison, have longer time horizons and are less impacted by the immediate exit environment.

Given that, it wasn’t surprising to see that early-stage investment was relatively flat, with $13.5 billion invested in Q2, down just 2% from the prior quarter.

Year over year, however, the comps look less favorable. Second-quarter early-stage investment was down 47% from the same period in 2022. Round counts followed a similar pattern. 

For a look at the dynamics over the past five quarters, we chart out early-stage investment totals and round counts below:

As usual, a handful of outsized rounds boosted the quarterly totals. For Q2, there were at least 22 early-stage rounds of $100 million or more. 

The largest funding recipient was AI cloud infrastructure startup CoreWeave, which raised $441 million across two rounds. Next up were two RNA medicine companies: ReNAgade Therapeutics ($300 million Series A) and Orbital Therapeutics ($270 million Series A)


Turning to seed and angel stage, we see that investment fell in Q2, hitting the lowest quarterly level in years.

Overall, investors put $3 billion into North American investments at this stage, down 39% year over year and 13% quarter over quarter. Round counts also declined, although current Q2 tallies remain preliminary.

For a broader view, we charted out seed and angel investment totals and round counts for the past five quarters below:

Not all sectors are seeing a decline in seed funding. Per Crunchbase data, a number of areas remain hot for recently founded companies, including generative AI, esports, and tools for finding and filling jobs. 

We’re seeing some jumbo-sized seed rounds as well. In Q2, the standout was a $50 million seed financing for Hippocratic AI, a developer of AI technology for health care.


In terms of investment returns, the second quarter wasn’t a red-hot period for either startup acquisitions or public offerings. However, some good-sized exits did happen. Below, we look at the highlights.


While the IPO market remained quiet in Q2, a few companies did manage to carry out market debuts.

The biggest offering came from Cava, a venture-backed Mediterranean-inspired eatery chain that saw shares spike after trading commenced in late June. The Washington, D.C.-based company recently had a market cap of more than $8 billion.

Net Power, a Durham, North Carolina-based provider of emissions-free power from natural gas, also carried out a sizable offering. The company completed a SPAC merger in June and had a recent market cap around $860 million.

To flesh things out, we put together a list of five funded companies that completed public listings in Q2:


The second quarter also was a reasonably busy period for venture-backed M&A, with multiple 10-figure acquisitions and several in the hundreds of millions.

Scopely, a Culver City, California-based game studio, inked the largest deal. In April, Savvy Gaming Group, a game developer owned by Saudi Arabia’s Public Investment Fund, announced plans to acquire the 12-year-old company for $4.9 billion.

Next up, Databricks announced in late June that it is acquiring MosaicML, a provider of generative AI tools for developers, in a transaction valued at around $1.3 billion. The same week, Visa announced its purchase of Pismo, a digital banking technology platform, for $1 billion in cash.

For a quick rundown of big startup M&A deals for the quarter, we used Crunchbase data to assemble a list of the top nine:

Summing up and looking forward

Overall, with the exception of a few big exits and unicorn rounds, it wasn’t the most upbeat quarter for startup funding. Total startup investment is only about one-third what it was at the peak in Q4 of 2021. 

One consolation, however, is that when things go down, that sets a lower bar to clear for subsequent quarters. In Q3 of 2023, for instance, North American startup investors will have to do just $33 billion worth of deals to qualify as a sequential “up” quarter. 

Future uncertainties notwithstanding, this seems like an entirely realistic benchmark to hit. And remember: If the IPO market comes back, we should start seeing large pre-IPO rounds getting done too. Those have been largely absent since market debuts dried up over a year ago.

So, maybe this is the bottom. Coming from someone who was quite premature forecasting a peak a few years ago, I wouldn’t put great faith in such a prediction. Durations of market cycles are notoriously hard to pin down. 

But still, a hit public offering from a high-profile unicorn or two could do a lot to spark a startup funding rebound. 

Sometimes, it doesn’t take much to tip investors’ mindset from frugality to FOMO. 

Illustration: Dom Guzman


  1. Technology growth is a private-equity round raised by a company that has previously raised a “venture” round.

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