Funding to U.S. tech startups reportedly plummeted 55% during the first quarter of 2023.
Those companies raised $37 billion in venture capital (VC) in the first three months of the year, the lowest level in 13 quarters, Bloomberg News reported Thursday (April 6), citing data from PitchBook and the National Venture Capital Association.
According to the report, VC firms have scaled back the number of investments they’re making and the size of those investments, with the quarter seeing under 3,000 deals, the lowest in more than five years.
“The whole market is taking much more caution toward investment,” Kyle Stanford, a Pitchbook venture capital analyst, told Bloomberg. “It’s not going to be easy for companies to raise capital even if they’re growing at a pace they set in their last round.”
Last month’s failure of Silicon Valley Bank (SVB), which either funded or served almost half of venture-backed companies and many VC outfits, rocked a sector that was already seeing a downturn in funding.
“Just over a year ago, the startup funding landscape was basking in the glow of a sizzling 2021 and hoping to carry the momentum into the new year,” PYMNTS wrote recently. “However, at the beginning of 2023, funding for startups has considerably slowed down, almost to a crawl.”
As noted here in late February, VC funding fell 65% year over year in the closing quarter of 2022, with the amount of money raised in new funds for that period hitting the lowest total for a fourth quarter since 2013.
PYMNTS also examined the effect of this trend on the FinTech world late last month, writing that proof “of post-SVB investor anxiety is already taking shape, as FinTechs going public since 2020 are now trading at 54% below offer price.”
Lending platforms in particular drove this recent rout, pushing the PYMNTS IPO Index down almost 5% in March. But FinTechs focused on other suffering sectors are seeing difficulties as well, as mortgage facilitation platform Blend reported its stock had plunged 40% over the past five sessions.
The reality, PYMNTS wrote, “is that not all FinTechs may survive what’s already turning out to be a turbulent 2023.”
Andrea Lamari, general partner at Manhattan Venture Partners, said in an interview with Bloomberg that the industry is playing close attention to the broader economy and how it affects the tech world.
“There has not been this level of uncertainty in nearly a decade surrounding what the macro environment impact will be on startups,” said Lamari. “It’s as if everyone’s waiting for the next shoe to drop.”
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