How startup funding is going (badly).
2023 was a bad year for Silicon Valley startups. But venture capital funding is not just declining in the United States, but around the world
2023 was a bad year for startups in Silicon Valley , the US (and global) heart of the technology and innovation industry: the value of venture capital deals dropped to levels not seen since 2019.
VENTURE CAPITALISTS FOCUS ON ARTIFICIAL INTELLIGENCE AND NEGLECT THE REST
According to preliminary data released by PitchBook and analyzed by Bloomberg , last year investors favored artificial intelligence companies, while the rest of the startups did not receive much. In total, in 2023 the so-called venture capitalists – i.e. those investors willing to take the risk of investing in companies with high development potential, in exchange for a stake in the capital – invested 170.6 billion dollars in the United States, for approximately 15,000 agreements: this is a sum 30 percent lower than that recorded in 2022.
A GLOBAL SLOWDOWN
2023 was a year of slowdown in the venture capital industry not only in America, but around the world. At an international level, in fact, investors financed startups for 345.7 billion dollars, 35 percent less than what they had spent in 2022 and the least since 2017. According to Bloomberg , this decline in funding is a problem because the venture capital has been fundamental to the rise of today's most relevant companies, such as Amazon, Google and OpenAI: "the way venture funds are raised and invested has a huge impact on growth and innovation", writes the agency .
EQUILIBRIUM AFTER THE PANDEMIC
High-risk investments, however, have decreased significantly after the boom that occurred during the pandemic, when confinement at home increased the demand for technological devices and digital solutions. According to Kyle Stanford, an analyst at PitchBook, the venture capital industry is looking for balance after the post-pandemic period. The expert also noted that this type of investment is directed towards companies that have a good chance of becoming very large and prosperous, and that there are currently around 54,000 companies supported by venture capital funds in the United States.
THE RAISING OF VENTURE CAPITAL ALSO DECREASES
In 2023, not only the investments of venture capitalists decreased, but also the funds that these entrepreneurs managed to raise: in the United States there was a drop of almost two thirds compared to the values of 2022; on a global scale, there has been almost a halving. American venture funds raised $66.9 billion in 2023; worldwide, the funds raised 160.9 billion.
TOWARDS AN IMPROVEMENT?
The situation seemed to improve towards the end of 2023, as in the fourth quarter of last year, venture deals in the United States amounted to $37.5 billion, compared to $39.8 billion in the last quarter of 2022. Internationally, the situation was slightly less positive: $76.6 billion in venture deals in the fourth quarter of 2023 versus $94 billion in the fourth quarter of 2022.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/calo-venture-capital-startup-stati-uniti/ on Sun, 07 Jan 2024 06:23:46 +0000.