January Monthly Recap: OpenAI Raised A Third Of All Funding

It is not every month that a company raises $10 billion in capital, but generative AI startup OpenAI did just that. Led by Microsoft, the deal included some unique funding terms. This single raise amounted to a third of the $31 billion in capital raised in January 2023 overall.

Despite that, global venture funding for January was down 50% year over year from the $62 billion invested in January 2022, but up 27% month over month from the $24.5 billion invested in December 2022.

This is the first month since June 2022 to breach $30 billion in funding.

$10 billion and up

To find another $10 billion funding to a venture-backed startup, we have to go back five years to 2018. Ant Group raised $14 billion from a group of growth investors and Juul raised $12.8 billion from big tobacco. That was the last recorded equity funding for Ant Group, which is still a private company. Meanwhile, Juul raised funding at the end of 2022 and cut staff to avoid bankruptcy.

Funding stages

Despite the massive OpenAI raise, late-stage funding was still down 46% year over year — but up 52% month over month.

Meanwhile, seed and early-stage funding were down by more than 45% year over year. Seed was up 14% and early stage down 7% month over month.

Micro-bubbles

“I don’t see the public markets recovering this year …” said Hussein Kanji, co-founder of London-based Hoxton Ventures when we spoke to him in the new year. “There’s too much uncertainty.”

Alongside the funding slowdown, Kanji anticipates mini bubbles in sectors like generative AI. “Prices go up, because there’s only one company or a handful of companies and more people who want to invest in it,” he said. As a result, valuations increase.

In the past few years, “these tech multiples went up to very high levels and have come back down to historical averages. They’re really not that low in the grand scheme of things. They’re just low by the last few years’ standards,” said Kanji on the bitter pill investors are having to swallow.

Methodology

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 Feb. 6, 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.

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. 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