This time around, the promises of artificial intelligence are capturing investor attention. That downturn, after all, coincided with two major technology trends: the growth of cloud computing and the advent of smartphones. 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. It was only in the fourth quarter of 2022 that global seed funding amounts trended down year over year by more than 25%. In the first half of 2022, seed funding increased each quarter based on a year-over-year comparison. That’s significant because seed funding was by far the least-impacted funding stage through the 2022 reset. 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. Let’s look at the particular impact of the slowdown on each funding stage, which operate with different classes of investors. 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.ĭeal counts have shifted downward at each stage with a more dramatic shift as of Q3 2022. Quarter-over-quarter funding was flat, despite two of the largest fundings in these recent peak years raised this past quarter.
This is in line with the amount of dry powder available in 2021, but investors that year were plowing the money rapidly into startups.ĭespite the record funds raised by investors, they continued to deploy capital at a slower pace in first-quarter 2023.
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.
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