Global Venture Funding In Q3 2023 Falls Again Despite Late-Stage Rebound Led By Huge AI Deals

Global venture funding in the third quarter of 2023 reached $73 billion — up a bit quarter over quarter and down 15% from the $86 billion invested in Q3 2022, Crunchbase data shows.

Despite the uptick quarter over quarter, this is the second-lowest quarter since funding started to slide in 2022. The startup world is now five to six quarters into the current funding decline, Crunchbase data shows.

Seed and early-stage funding continued to decline year over year, a clear signal that the venture markets are not opening up yet. Late-stage funding was up by close to 10% year over year and 30% quarter over quarter, as companies in strategic sectors — including semiconductors, AI, electric vehicles and sustainability — raised large fundings.

Easing of the IPO markets
AI funding boost
Late-stage funding is up
Early-stage declined
Seed also declined
Funding slowdown
Methodology
Glossary of funding terms

Easing of the IPO markets

September marked the first time in 18 months that venture-backed technology companies braved the public markets. Last month, two well-established venture-backed startups went public, a signal that the IPO markets could open up for tech listings in 2024.

Instacart — in the top 10 of the most highly valued private companies based on its 2021 funding value — went public at a steep 75% discount to its last private valuation. And marketing email personalization company Klaviyo, also in the top 100 unicorn companies until it went public, listed at a value of $9.2 billion, not far off from its last 2021 private value of $9.8 billion.

Both stocks have come down from their IPO listing price, a signal that the public markets are especially price sensitive in the current economic market when it comes to new listings.

AI funding boost

AI companies raised more than $10 billion this past quarter, on par with Q2 2023, Crunchbase data shows.

The largest AI rounds went to OpenAI competitor Anthropic. The company raised $1.3 billion from Amazon and committed to using AWS and Amazon’s inhouse chips to train models.

Cloud data company Databricks raised $500 million at a value of $43 billion in a deal led by T. Rowe Price. That was the largest priced round last quarter and marked an up round from Databricks’ $38 billion value in 2021.

In related news, companies in the semiconductor sector raised $4.5 billion in Q3, with 96% of the investments into companies based in China, Crunchbase data shows.

Late-stage is up

Late-stage funding increased in Q3, the second-highest quarter for late-stage funding since the third quarter of 2022 when funding slowed precipitously.

Late-stage funding was up 30% quarter over quarter and almost 10% year over year, totaling $43 billion.

Large fundings went to companies in the semiconductor, sustainability and AI sectors.

Much of this increase is visible in markets outside of North America.

Late-stage funding in Asia grew at a greater proportion year over year — 50% — due to large rounds in semiconductor, electric vehicles and sustainable energy technology.

In Europe, late-stage funding doubled quarter over quarter and was up 20% year over year with large funding deals in energy and manufacturing.

Early stage declined

Early-stage funding showed the steepest decline year over year compared to all other stages.

In the third quarter of 2023, early-stage funding totaled $23.4 billion, down 38% year over year from $37.6 billion and down 16% quarter over quarter.

All regions showed declines in early-stage funding.

Seed also declined

Seed funding totaled $6.6 billion in Q3, down 27% year over year from $9 billion — an indication that funding at the earliest stages continues to slow.

Seed funding was down quarter over quarter and year over year across all regions.

Funding slowdown

Large fundings to AI, semiconductor and sustainability sectors did not stem the slowdown in global funding.

For the first three quarters of 2023, global funding reached $221 billion, marking a 42% decline year over year so far, down from the $381 billion invested in the same timeframe in 2022. Year-to-date global venture funding in 2023 is also down from the $501 billion invested between Q1 and Q3 2021.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of Oct. 3, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

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.

Glossary of funding terms

We have made a change to how we include corporate funding rounds in our reporting as of January 2023. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round.

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Illustration: Dom Guzman