While the continent’s funding is up compared to the past three quarters, that increase is concentrated in late-stage funding, based on an analysis of Crunchbase data.

For seed and early-stage companies in Europe, however, both amounts and funding counts were at the lowest ebb since we began charting the downturn.

The largest region for funding in the third quarter in Europe was the U.K., followed by Sweden, France and Germany.

Table of Contents

• AI holds up
• Late stage
• Early-stage funding
• Seed funding
• Methodology
• Glossary of funding terms
• Related Crunchbase Pro query

AI holds up

Europe’s AI companies raised $1.8 billion in Q3 2023, representing 11% of the continent’s funding and close to one-fifth of global AI funding.

Large rounds were raised by U.K.-based driverless transport company Conigital, Berlin-based AI defense company Helsing, Paris-based AI infrastructure company Poolside, London-based AI for disaster recovery Tractable, and Germany-based consumer and industrial robotics developer Neura Robotics.

Let’s dive into the distinct trends by funding stage.

Late stage

Europe’s late-stage funding doubled quarter over quarter with notable funding raised in the sustainable energy sector across multiple markets. Large fundings were raised by:

• Sweden-based H2 Green Steel, a steel production company using green energy;
• Stockholm-based battery manufacturer Northvolt;
• Verkor, another battery manufacturer, also based in France;
• London-based battery storage company Zenobe Energy.

Early-stage funding

Europe’s early-stage funding totaled $4.5 billion in the third quarter, the lowest amount since we started tracking the downturn as of the third quarter of 2022.

The largest proportion of early-stage funding was invested in Series A companies.

Seed funding

European seed funding totaled $1.4 billion in Q3, down from $2.1 billion a year earlier.

The stage saw funding down around 25% quarter over quarter and 30% year over year — its lowest since the downturn.

However, European companies raised a larger proportion of global venture capital when compared to earlier this year — around 23% in Q3 as venture funding flattened in North America.

The pullback in venture has made a huge difference in how capital-efficient a startup needs to be, said Michiel Kotting, a partner at Northzone, one of the earliest venture outfits in Europe and a firm with offices across Europe as well as in New York. It is never a straight line for founders building a startup, he said.

The firm has experienced three significant downturns since its founding in 1996. Contrary to what you might think, a recessionary environment “does not make entrepreneurship harder or disfavor tech,” he said.

“If you only measure the success of tech companies by the amount of capital they’re able to raise, then things look really oblique right now,” he said, adding that if you look at the market share of companies being built, a 10x improved consumer experience means the markets are thriving.

Methodology

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

Related Crunchbase Pro query

• European Funding Q1-Q3 2023

Illustration: Dom Guzman

Last month’s startup funding total was on par with what’s emerged as the new normal for venture capital. So far in 2023, funding has averaged just over $23 billion per month as active investors have cut back their funding pace at each stage.

Late-stage funding increased year over year for the first time in 18 months, but was still below the peak for this year, Crunchbase data shows.

Early-stage funding almost halved and seed funding was down by around one-third from a year ago.

Deal counts in August 2023 almost halved from a year earlier. (Though it’s good to keep in mind that seed fundings are typically added to the database more slowly over time, after the end of a month or quarter.)

Market opening

While startup funding has settled into a new, lower normal, there is hope on the horizon. Last month, two well-funded venture-backed unicorn companies — grocery delivery platform Instacart and targeted marketing platform Klaviyo — filed plans to go public in September. When they do, their offerings and Arm Holdings’ planned Nasdaq debut — slated to be the largest tech IPO in almost two years — could buoy the entire startup funding landscape.

Late-stage bump

Late-stage funding last month totaled $13.3 billion, up around 25% compared to August 2022.

While last month did not mark the peak for late-stage funding this year — the $10 billion OpenAI funding vaulted January to the leading month for late-stage funding this year — it was still above the monthly average in 2023.

The largest fundings last month were raised by companies in transportation, specifically China-based electric vehicle companies, sustainability with EV battery companies, and in biotechnology.

Despite some large fundings to generative AI companies, AI wasn’t the largest sector. Funding to AI companies totaled around $2.7 billion — about 13% of all venture funding — in August.

Health care and biotech companies raised around $5 billion — or 23% of all venture funding in August. The transportation sector raised $4 billion, with large fundings to China-based electric vehicle companies. Financial services companies raised $2.8 billion last month.

Companies with disclosed valuations that raised funding at an increased valuation of more than 75% included open-source generative image company Hugging Face, Tel Aviv-based large language model company AI21 Labs, and sales marketing platform Apollo.io.

We also saw down rounds. Ramp raised a $300 million funding at a $5.8 billion valuation — down from its $8.1 billion valuation in 2022.

Methodology

Funding rounds included in this report are seed, angel, venture, corporate-venture and private-equity rounds in venture-backed companies. This reflects data in Crunchbase as of Sept. 5, 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.

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

As of January 2023, we have made a change to how we include corporate funding rounds in our reporting. 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.)

With political tensions between China and the U.S. at a high and now an official ban on certain U.S. tech investments in the nation, the dots seemed easy to connect.

Nevertheless, China’s Q2 numbers saw a slight bump, both quarter to quarter and year to year. Instead, it was India, South Korea and other nations in the region that led the decline in Asia’s numbers.

Still, a deeper dive into Crunchbase data shows a softening in China’s early-stage funding that was somewhat covered up by a surge in large growth rounds last quarter.

While late large rounds count toward a region’s total funding, the decline in early-stage funding could set off alarms about the full health of the VC market in China. That’s because a longer-term decline in early-stage cash inevitably leads to fewer startups maturing and raising those large, growth rounds.

Let’s look at the overall numbers

Total funding numbers in China for Q2, and even the first half, have not looked too bad considering the venture market everywhere is down.

In Q2, China-based startups raised a total of $11.5 billion, a 25% increase from the $9.2 billion raised in Q1 and even a small 7% jump from the $10.8 billion raised in Q2 last year.

But first-half numbers paint a more pessimistic view of the venture market. The $20.8 billion raised in H1 was a 13% decrease from H2 2022 and a 17% drop from H1 2022. The H1 total is actually the smallest amount of funding Chinese startups have seen in a six-month period since at least before 2018.

Those first-half numbers this year also were charged up with the help of some large rounds — mainly the reportedly $2 billion raised by fast-fashion startup Shein, according to The Wall Street Journal in May.

In fact, that round led to a surge in late-stage growth and private equity funding numbers in the region.

Chinese companies took in $5.8 billion in such funding in Q2, a tremendous jump of 60% from the previous quarter’s $3.6 billion and even a small increase from the $5.2 billion raised in Q2 2022.

Problems start earlier

Now that’s not to say Shein was the only significant round. Also last quarter, Anhui YOFC Advanced Semiconductor raised nearly $524 million in a Series A, SJ Semi closed a $340 million Series C, and pharmaceutical company Hasten Biomedical locked up a $315 million venture round.

But if you remove the Shein round, late-stage and technology growth funding would have been $3.8 billion — much more in line with the previous three quarters.

Even with that said, the area that may cause the most concern is the stage directly before the late-stage growth rounds.

Early-stage funding to Chinese startups was $5.1 billion in Q2 — a very slight uptick quarter to quarter and year to year.

However, Q2 represented a 28% drop off from Q3 last year and a 39% plunge from Q4 (Q2 2022 was sort of an outlier, as it was the lowest quarter for early-stage funding to China-based startups since 2020).

To illustrate that point further, H1 early-stage funding was $10.1 billion — a 35% decline from H2 2022 and a 17% drop year to year.

In fact, the H1 numbers were actually the lowest total of early-stage funding in China for a six-month period since H2 2020.

Why it’s important

It was impressive to see Chinese funding seemingly rebound last quarter — and they actually did by the numbers.

However, the Shein round did cover up some warts in late-stage growth funding, which really has settled into the $3 billion-plus range if you minus the fast-fashion giant’s raise.

What may be more disconcerting is the early-stage funding numbers. The last two quarters have seen a significant decline and that can foreshadow real issues down the line.

Late-stage growth rounds are what moves the needle in funding — as Shein illustrates. However, a startup has to get to that level to receive those massive dollars. In order to do that, it needs that early-stage money, or it will disappear long before going out for a big, late round.

China’s tech scene is facing significant pressure right now. U.S. investors started pulling back long before the recent executive order was signed. In addition, while that order only prohibits certain investments in China, some VCs have dropped the region altogether due to pressure from LPs.

Right now, keeping LPs happy any way possible has become even more important, since general partners can’t actually show real returns with the IPO and M&A markets somewhat stalled.

It also will not help that just last week it was reported Chinese regulators are dragging their feet when it comes to approving IPOs in the country — further frustrating investors who fund the startup ecosystem there.

All of those headwinds and other geopolitical tensions likely have created some of the difficulty Chinese startups are seeing in raising large rounds. Now, early-stage startups may well be sharing that pain.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of Aug. 29, 2023.

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.)

Further reading

• Asia Startup Funding In First Half Of 2023 Falls 50% As Late Stage Continues Decline
• Chinese Startup Investors Are Stepping Up With Capital As American VCs Retreat
• US Investment In China Tech Scene Falls As Political Headwinds Strengthen

Illustration: Li-Anne Dias

Global venture funding in July 2023 totaled $18.6 billion — down about 20% month over month, and 38% compared to the $29.8 billion invested in July 2022.

While that’s not the lowest monthly total we’ve seen this year, it’s close: Total funding per month so far in 2023 has ranged from a low of $18 billion in February to a peak of $33 billion in January, per Crunchbase data.

All funding stages — seed, early and late — in July 2023 were down close to a third compared to a year ago.

Notably, seed and early-stage funding hit its lowest amount in a single month since we began tracking the downturn in July 2022. That’s a scary sign for the startup ecosystem as a whole, since earlier funding stages had remained relatively insulated at the start of the downturn.

Now, even those fledgling companies are struggling to raise their early rounds of funding — and we’re also seeing those companies that do raise seed and early-stage rounds struggle to graduate to the later stages.

The seed funding ecosystem is also the most exposed due to the large number of new players and the inherently risky nature of seed-stage investing. After all, it’s widely believed that even in a normal market, 50% to 90% of startups fail.

Startup valuations reset

When the public markets started their downward slide in December 2021, it took the private funding markets a full quarter before registering the need to scale back on valuations.

By the second quarter of 2022, the amount of late-stage funding to startups had come down significantly. Investors signaled they would pivot away from investing in highly valued companies and focus on companies at the earliest funding stages who were years away from exiting.

But, as many startups have seen sales slow in this post-pandemic world, and raising later-stage funding became more difficult, even the previously robust early-stage funding environment started to tighten as well.

By the third quarter of 2022, early-stage funding fell. In the fourth quarter, it became obvious seed funding wasn’t safe either.

The protracted slowdown has continued into 2023. That has given way to concerns that the handoff between investors at each stage is broken as startups find it much more difficult to raise follow-on funding.

Seed- and early-stage startups face a reckoning if they are not able to raise funding on a two-year cycle. As investors cut back, startups funded during the market peak face closure at greater rates.

Arguably, for years the whole seed-stage funding ecosystem grew massively because there was a strong exit market at the end of the pipeline.

Seed investor Sam Lessin predicts that the seed ecosystem will go into “time out” for at least 18 months — if not longer — “until the inventory of dramatically over-marked late-stage private deals got worked through / washed out / expired on the line.”

That could cause the entire seed funding ecosystem to die off temporarily, before being reconstituted, he predicts. That’s because “run-of-the-mill public tech companies just aren’t worth that much it turns out — and if the bulk of so-called unicorns can’t get public / or do and are disappointing, the whole model of seed investing starts to look way way less attractive as an asset class.”

The blush came off unicorn valuations some time ago. And last month, new unicorns hit the lowest count since we started tracking new unicorn counts at the beginning of 2020.

Largest sectors

Perhaps surprisingly, funding to AI companies did not stand out as a sector this past month.

Funding to AI companies was around $2 billion — about 11% of all venture funding — in July. Health care and biotech companies raised around $3.8 billion, renewable energy around $3.1 billion, and financial services companies raised $2.9 billion this past month.

Methodology

Funding rounds included in this report are seed, angel, venture, corporate-venture and private-equity rounds in venture-backed companies. This reflects data in Crunchbase as of Aug. 4, 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.

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

As of January 2023, we have made a change to how we include corporate funding rounds in our reporting. 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

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)

Seed

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.

Exits

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.

IPOs

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:

M&A

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

Learn More

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

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.

AI

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, Builder.ai, 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.

Methodology

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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Sun, sand and no personal income tax were among the allures that drew venture investors and founders to Florida after the pandemic disrupted their usual commutes. That influx, plus greater recognition and backing for the state’s homegrown startup scene, contributed to a couple of record-setting years for investment.

To wit, at Crunchbase News, we published a series of articles in the past couple of years highlighting the state’s growing clout as a startup hub:

• In early 2021, we looked at Miami’s rising star among relocating VCs and techies who were firm in their insistence that it was not a retirement decision. Funding to startups in the metro area hit a multiyear high the prior year,
• A few quarters later, we talked about how the hype around South Florida as an up-and-coming startup hub wasn’t just hype. Early-stage funding to the state quadrupled in 2021. Big rounds piled up in sectors from crypto to logistics to health care.
• Things were still pretty heated for much of 2022. That year, we reported, Florida saw the biggest percentage increase of any state in annual venture capital investment.

So that was then.

Now, we hate to put a damper on the party. But the data has spoken. Florida in 2023 is not a growing startup funding ecosystem. It is a shrinking one — with funding statewide receding even faster than it is nationally.

Florida’s quarterly funding drop exceeds U.S. declines

For a sense of how far things are down, we charted out seed through late-stage funding to Sunshine State companies for the past six quarters below:

As you can see, investment hit its peak early last year. Funding has mostly headed lower ever since.

So, you may be thinking that this is not a Florida-specific phenomenon. Venture funding, after all, is down sharply worldwide, including across the U.S.

This is true. However, the Florida shrinkage from the peak to this year is more dramatic than what we’ve seen nationwide.

Across North America, venture funding was down 46% year over year in Q1 2023, per Crunchbase data. But in Florida, funding was down an astonishing 81% from the year-ago quarter.

Annual comps look bad too

Annual comps also look discouraging. For perspective, we charted out annual seed to late-stage funding for the past five calendar years below:

As shown above, the state is nowhere near on track for a repeat performance of 2021 and 2022. Funding looks a bit closer to 2020 levels, when buzz around South Florida’s startup scene was just beginning to take off.

So who is and isn’t getting funded?

Still, while funding is down this year, deals are getting done, including some good-sized ones.

So far in 2023, the largest funding recipients include:

• Deepwatch, a Tampa-based cloud security platform, closed a $180 million equity and strategic financing round from a handful of investors including Vista Credit Partners — Vista Equity Partners’ credit arm.
• QuickNode, a Miami-based blockchain development platform, picked up $60 million in a January Series B round.
• EnergyX, a Fort Lauderdale-based startup focused on lithium extraction and refining, landed $50 million in Series B financing led by GM Ventures.

Notably, we’re no longer seeing the kinds of supergiant financings that closed in 2021 and early 2022. Those included companies like Yuga Labs, of Bored Ape NFT fame, MoonPay, a crypto payments company, and Magic Leap, the VR unicorn. The three collectively raised over $1.5 billion in those two years.

Causes for a pullback

It’s difficult to pinpoint Florida-specific causes for a pullback in funding to the state. However, there are a lot of factors impacting startup funding everywhere. This includes falling unicorn valuations, lower investor enthusiasm for once-hot sectors like Web3, fintech and consumer products, and a shuttered IPO market.

Is politics a factor too? Florida’s rightward political shift, and the attention-seeking antics of Ron DeSantis, the Republican governor and potential presidential candidate, have certainly been in the headlines lately. However, I didn’t find documented evidence 1 in recent months of a startup founder or backer changing a decision around investing, expanding or relocating in the state based on political considerations. We’ll see if that changes going forward.

Given that a single massive round or two can significantly impact the totals, it’s also quite possible we’ll see some deals emerge that change the narrative around Florida’s above-average investment declines. At this point in the year, however, the numbers indicate that the Sunshine State startup scene is a lot less buzzy than it used to be.

Related Crunchbase queries

• Funding To Florida-Based Startups

Illustration: Dom Guzman

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For the first quarter of this year, Andreessen Horowitz and General Catalyst ranked at the top of our list of the most active and spendiest lead venture investors. However, their leading roles come at a time when the cast of deep-pocketed startup backers is shrinking some.

In particular, the investors who used to reliably top the list — Tiger Global Management and SoftBank Vision Fund — are taking a breather. The two didn’t even crack the Top 20 in Q1.

It’s the latest indication that times have changed in the VC world. We’re seeing muted activity at seed and early stage, and fewer big late-stage rounds amid a lackluster IPO market.

Even so, deal flow hasn’t dried up. While many of the busiest investors in Q1 are mostly backing fewer rounds than they did a year ago, several have actually picked up the pace. Below, we look at the 10 most active lead or co-lead venture investors in Q1:

Notably, about half the active lead investors have slowed dealmaking compared to bubblier days a year ago. This includes Andreessen, Lightspeed Venture Partners and Sequoia Capital India.

Others are actually leading more deals than they did a year ago. This group includes General Catalyst, Google Ventures and Altos Ventures.

Table of Contents

• Spendiest investors
• Most active seed investors
• Down, but not out
• Further reading

Spendiest investors

Next, we tallied up the largest rounds and their lead backers to get a sense 1 of which investors put the most capital to work in the first quarter.

As it turns out, our findings were highly skewed because there were two unusual and enormous financings that dwarfed every other Q1 deal in size. These were the reported $10 billion investment into OpenAI — largely from Microsoft — and a $6.5 billion round for payments giant Stripe.

All of the seven top investors in our list of those who led or co-led the most capital-intensive batch of financings last quarter, shown below, were Microsoft or Stripe backers:

Co-lead investors for the $6.5 billion Stripe financing announced in March include Andreessen, General Catalyst, MSD Partners, Thrive Capital, Founders Fund and Baillie Gifford. Microsoft, meanwhile, is the only listed investor for OpenAI’s mega-financing.

As you can see from the chart above, there’s a huge gap between the Microsoft and Stripe backers and everyone else. The next-highest names on the priciest lead round list — Greenoaks and Spark Capital — led rounds valued in aggregate at less than a fifth that of the Stripe backers.

Most active seed investors

While we saw some dramatic shifts in the ranks of most active and highest-spending venture investors, seed stage was a bit more stable.

Last year’s two most prolific seed investors — Y Combinator and Techstars — still topped the list in Q1. We also saw mostly familiar names round out the ranks of the top eight most active seed-stage investors, shown below:

It’s not surprising to see seed investors staying active even as overall funding contracts. For investors at this stage, the state of the IPO market or public tech valuations aren’t an immediate concern, as their portfolio companies are likely a long way from exit.

Still, a majority of the most active seed investors for Q1 reported lower deal counts compared to a year ago. The pullback is part of a broader reduction in global seed-stage investment, which fell 44% year over year in Q1, per Crunchbase data.

Down, but not out

The broad takeaway from our latest most active investor data dive is that overall venture and seed firms are putting less capital to work in fewer deals.

It’s also probably prudent not to put an overly optimistic spin on the two giant rounds of the quarter for Stripe and OpenAI. The Stripe investment, after all, was at a down valuation, and OpenAI, a capped profit company governed by a nonprofit, was not a traditional venture round.

The more measured take on Q1 is that this looks like a continued pullback, but not a collapse. Big rounds are still closing, and while some big names have dropped from the ranks of high-spending investors, other startup backers are keeping active.

Further reading

• Global VC Funding Falls Dramatically Across All Stages In Rocky Q1, Despite Massive OpenAI And Stripe Deals
• North American Startup Funding Weakens Further In Q1
• Asia Venture Funding Drops 57% Year Over Year, With Late Stage Posting Largest Decline

Illustration: Dom Guzman

Learn More

Global funding in the first quarter reached $76 billion — marking a 53% decline year over year from $162 billion in the first quarter of 2022. That’s even including a reported $10 billion investment into OpenAI — largely from Microsoft — and a $6.5 billion round for payments giant Stripe. Without those two large deals, Q1 venture funding would have been down even more dramatically, close to $60 billion.

Every funding stage last quarter was down 44%-54% year over year, a clear signal that the slowdown is not confined to late-stage funding. Investors across each stage scaled back as they took time to assess new investment opportunities while guiding existing portfolio companies.

The collapse of Silicon Valley Bank on March 10 was an added shock to a weakened funding environment. The bank had more than 20,000 startup depositors with $5 million or less in revenue.

The impact was not limited to U.S. startups, either: SVB was also the bank of choice for startups around the world, sourcing funding from U.S. venture firms. Investors and founders scrambled to secure funds to meet payroll as a swath of startups faced possible closure through lack of funds.

Table of Contents

• Deep pockets
• Seed
• Early
• Late and large
• Slowdown deepens
• Methodology
• Glossary of funding terms
• Further reading

Deep pockets

Despite the slowdown, investors in private companies still hold record amounts of dry powder, with around $580 billion as of the end of 2022, according to an estimate by James Ephrati of Lightspeed Venture Partners. This is in line with the amount of dry powder available in 2021, but investors that year were plowing the money rapidly into startups.

Despite the record funds raised by investors, they continued to deploy capital at a slower pace in first-quarter 2023. Quarter-over-quarter funding was flat, despite two of the largest fundings in these recent peak years raised this past quarter. OpenAI’s $10 billion raise in January and  Stripe’s $6.5 billion round last month make up the largest fundings to private venture-backed companies since 2019 — before the pandemic.

Deal counts have shifted downward at each stage with a more dramatic shift as of Q3 2022.

Let’s look at the particular impact of the slowdown on each funding stage, which operate with different classes of investors.

Seed

In the first quarter of 2023, seed funding totaled $6.9 billion, down 44% year over year — a signal that even at the earliest funding stages, investors are pulling back.

That’s significant because seed funding was by far the least-impacted funding stage through the 2022 reset. In the first half of 2022, seed funding increased each quarter based on a year-over-year comparison. It was only in the fourth quarter of 2022 that global seed funding amounts trended down year over year by more than 25%.

Many multistage investors pivoted away from late-stage but kept their seed practices open, informed by the 2008 crisis when some of the most critical companies — including Square, Airbnb, Uber, WhatsApp and Slack — were started during that period. That downturn, after all, coincided with two major technology trends: the growth of cloud computing and the advent of smartphones.

This time around, the promises of artificial intelligence are capturing investor attention. This tech will impact many layers of the technology landscape, with opportunities for new and established companies. AI companies that raised at seed include large language models company Fixie.ai, code platform CodiumAI and biotech MoleculeMind.

Early

Early-stage funding totaled $25.6 billion in Q1, down 54% year over year.

The year-over-year pullback in early-stage quarterly funding in 2022 started in the third quarter and has continued to decline.

Of the two funding stages which make up the bulk of early-stage funding, Series B shows a larger decline compared to Series A year over year by amounts, medians and averages.

Late and large

Late-stage funding totaled $43 billion, a dramatic fall from $93 billion in Q1 2022, but up from $34 billion in Q4.

The billions of dollars raised by OpenAI and Stripe made up 22% of all venture capital raised this past quarter, and 38% of late-stage financings.

Slowdown deepens

The reset in 2022 has deepened across all funding stages quarter over quarter and year over year — outside of the blips from a few multibillion-dollar, late-stage financings. Sectors that were down in the first quarter include e-commerce, blockchain and cryptocurrency.

But artificial intelligence remains a bright spot, with large fundings in Q1 2023. Companies tagged with AI accounted for 19% of investment dollars last quarter, with the investments in OpenAI and hundreds of millions invested in the likes of Anthropic, SandboxAQ and Adept AI, according to Crunchbase data.

The slowdown is having a variable impact on different regions. More to come in the next week on how different geographies are impacted by the big reset in venture capital.

Methodology

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

Further reading

• North American Startup Funding Weakens Further In Q1
• Asia Venture Funding Drops 57% Year Over Year, With Late Stage Posting Largest Decline

Illustration: Dom Guzman

Learn More

That’s the narrative playing out across Latin America in the wake of a sharp shift in the startup funding climate. Per Crunchbase data, investors put $8.28 billion into the region in 2022, down 79% from 2021, a record-setting year.

Over all of 2022, investment was down heavily at both early and late stage, while seed investment actually rose a bit. In the fourth quarter, funding at every stage came in far below year-earlier levels.

For perspective, we chart out total funding, color-coded by stage, for the past 12 quarters below:

A couple quick takeaways stand out from the chart above. First, the magnitude of declines from Q1 to Q4 of 2022 was quite dramatic, evidence that the year started on a much more optimistic note than it ended. 

Secondly, it shouldn’t be understated that 2021 was a hard act to follow. While 2022 was below peak, it was still the second-highest funding year of the past decade, as illustrated in the chart below:

To get a clearer sense of the ups and downs of the 2022 funding scene, we break things down by stage below, including a look at the largest rounds and most active investors.

Late stage

We’ll kick things off at late stage, which has seen some of the steepest declines.

For all of 2022, investors put $3.57 billion into late- and growth-stage deals, per Crunchbase data. That’s a drop of over 72% from 2021, when over $13 billion went into late-stage dealmaking.

The year-over-year comparisons are even starker for the fourth quarter. During Q4 of 2022, just $450 million went to Latin American late-stage deals, down 84% from a year earlier. 

For a sense of the funding trajectory, we chart late-stage funding for the past five quarters below:

Even with the funding slowdown, we did see some good-sized rounds in the latter half of 2022. Standouts include NotCo, a Chilean maker of plant-based meat products that raised $70 million, and Cortex, a Brazilian business intelligence software provider that pulled in $50 million.

Early stage

Early-stage investment also slipped lower every quarter last year.

For the full year, an estimated $3.22 billion went into early-stage venture rounds. That represents a decline of just over 40% from 2021.

The fourth quarter came in especially low, with $344 million in early-stage investment, down 80% from a year earlier. For the bigger picture, we aggregated early-stage investment for the past five quarters below:

Some big early-stage rounds did get done, even in Q4. This includes a $28 million Series A for Lemon Cash, an Argentina-based digital wallet startup, and a $27 million Series B for Agrolend, which provides credit for Brazilian farmers.

Seed stage

Seed-stage investment in Latin America actually hit an all-time high in 2022. Reported deals totaled nearly $1.16 billion, up 9% from 2021.

However, the year-over-year gains are attributable entirely to heightened activity early in 2022. In the second half of the year, reported seed funding slowed considerably, as illustrated in the chart below:

Because there is often a lag between when seed funding occurs and when it is added to the dataset, it’s likely the Q4 numbers will rise in coming weeks and months. These additions, however, are still unlikely to change the general pattern of declining investment.

Big investors pull back

In 2021, much of the surge in venture funding to Latin America was the result of large, global investors upping their activity in the region. In 2022, by contrast, many of these active investors pulled back amid a worsening exit climate and diminishing valuations for their existing holdings.

The pullbacks were most pronounced in the second half of the year. SoftBank Latin America Ventures, for instance, had no disclosed investments in the latter half of 2022, per Crunchbase data. Tiger Global Management had just two. Both firms were among the most active global investors in Latin America in 2021.

Regional investors also cut back. Kaszek, the Brazilian firm that ranked as the most active regional investor in 2021, sharply reduced deal count in 2022, per Crunchbase data, most markedly in the second half. Deal count for Brazil-based Monashees, the second most active in 2021, was also down considerably in 2022.

Given that active investors did fewer deals across virtually all geographies in 2022, the pullbacks to Latin America aren’t necessarily indicative of growing pessimism about the region’s startup potential. Rather, this looks more like the familiar cycle of a down year after a very up year. 

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of Jan. 4, 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.

The most recent quarter/year will increase over time relative to previous quarters. For funding counts, we notice a strong data lag, especially at the seed and early stages, by as much as 30 percent to 40 percent a year out.

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

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

Learn More