VC Funding Drops in Q1 2023

Worldwide venture capital funding fell 53% in the first quarter of 2023, according to Crunchbase data released in early April.

Global VC funding totaled $76 billion during the quarter, compared to $162 billion during the first quarter of 2022.

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"We have likely not yet hit the bottom of this down cycle yet," Crunchbase Senior Data Editor Gené Teare told Yahoo Finance. "If the two largest fundings in OpenAI ($10B) and Stripe ($6.5B) were removed from this past quarter, funding would have been down more than 20% quarter over quarter and more than 60% year over year."

The fundraising environment has fluctuated in the past two years, Teare said, and the failure of Silicon Valley Bank has made it more difficult for companies trying to raise money.

Following a record year in 2021, interest rates rose, public technology stock values fell, the Russian invasion of Ukraine caused havoc, the IPO pipeline stalled, and valuations of private companies fell, according to the report.

“Companies are having to shore up their cash and delay fundraising,” Teare told Yahoo Finance. “In this environment, investors are more cautious about new investments."

Even funding for seed stage startups experienced a year-over-year funding decline of 44%, to $6.9 billion globally, Crunchbase data claims.

"The decline at seed stage is notable," Teare said. "[It's] 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."