Global venture funding plummeted in July as investors continued to shift their attention from late-stage to early-stage companies while investing fewer dollars in both stages.
July 2022 funding reached nearly $28 billion, a drop of 34% month over month from $42 billion in June, Crunchbase data shows. And funding is down 56% from $63 billion in July 2021.
Monthly funding totals do not always follow a clear trendline. Funding was lower in May, spiked in June, and was down this past month. How much this is part of a summer slowing in funding will be clearer as we reach the end of the third quarter.
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However, the second quarter of 2022 was already trending down—around 25% quarter over quarter and year over year—as investors began moving away from late-stage companies.
July’s nearly $28 billion total is the lowest funding month on record since November 2020, when funding reached $26.4 billion.
It has taken a while for the tumble in technology stocks—beginning in late December—to impact venture funding. This is in part because venture firms have raised larger funds in recent years and into 2022 as well, which helped maintain a competitive investment climate. Many technology sectors enjoyed significant growth through the past two years after the economic shock from the pandemic in early 2020.
Although investors continued to focus on early-stage startups in July, they invested fewer dollars in these young companies. The biggest pullback in funding month over month—surprisingly—is at early stage, which is down more than 40%. Within early-stage funding, Series B is down by more than 50% and Series A funding month over month is down by around 30%.
Year over year, the largest pullback is at late stage, down more than 60% to $16 billion from $42 billion in July 2021. Early-stage funding at $9 billion was also down by more than 50% from $18.6 billion a year ago in July.
Seed funding, on the other hand, is up slightly year over year, coming in at $2.5 billion compared to $2.4 billion in July 2021.
The most active global investors are keeping up their pace of investments in 2022 so far, according to a Crunchbase News analysis. However, as a cohort, these firms are investing more actively at the earlier stages—at seed and Series A—in new portfolio companies. And as they invest at these earlier stages, lower dollar amounts are committed.
As the sheen comes off late-stage funding, which experienced a huge hike in 2021, and the focus moves to earlier-stage funding opportunities, those startups that are able to raise in the climate will be focused on managing costs. As Pete Flint said in a blog post on how to Survive (& Thrive) In A Downturn: “We have seen many times that the leaders in markets are often just the last ones standing coming out of a recession, when everyone else threw in the towel or went bankrupt as they were unable to raise additional capital.”
That could be a good discipline for technology startups.
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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. 3, 2022.
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.
Illustration: Dom Guzman
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