Late-stage Funding Decline Leads VC Pullback In October

september to october calendar

Global venture funding reached $27 billion in October 2022, remaining flat month over month and down more than 50% year over year. 

Each funding stage declined at different rates year over year for this past month. Late-stage funding dipped the most, by more than 60% year over year. Early stage declined by around 40% and seed by 20%.  

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Seed and Series A fundings — while down — were the most robust funding stages when viewed by average and median sizes. From Series B onward, averages and median funding declines increase by each consecutive Series.

The number of companies funded also declined. We started the year with close to 3,400 companies funded in January 2022. In October, that number fell to 1,800 companies.  1


In each quarter of 2022, funding declines have accelerated downward from the peak of the fourth quarter in 2021. The first quarter was down 13% quarter over quarter, the second quarter was down 26% quarter over quarter, and the third quarter was down 33% quarter over quarter.

Over the last four months — since the third quarter — funding has leveled off, averaging around $27 billion per month. 

Late stage

In this new funding climate, the largest pullback is at late-stage financings. In a funding market more disciplined about valuation multiples in later-stage financing, will large funding rounds disappear?

Late stage as a proportion of funding averaged 49% of funding these past four months, down from an average of 63% in 2021 and 58% for the first half of 2022.

“It’s very hard to see companies raise north of $200 million unless the company is absolutely crushing it on all cylinders,” James Ephrati from Lightspeed Venture Partners said in an interview. 

But late-stage funding has not disappeared. 

While those counts are down, 18 companies this past month each raised a funding round of $200 million or more compared to 70 in October 2021. That number reached 57 for companies that raised $100 million or more, compared to October 2021 with 139 companies.

And of the 1,400-plus companies currently listed on The Crunchbase Unicorn Board in 2022 to date, 513 have raised funding. Pacing has slowed with 131 unicorn companies raising funding in the second half of 2022 through October, some of these newly minted. In the 2021 and early 2022 funding cycle, companies built up war chests while funding was abundant as 950 still-private unicorns raised funding in 2021. 

Fewer companies are able to raise large financings in this very different funding climate, but those fundings are still happening as venture firms have geared up with record fundraises targeting late-stage fundings. 

Tech market turbulence

Meanwhile, as sales growth slows in the sector, tech companies are announcing new waves of cost cutting, hiring freezes and tech layoffs.

Bold tech plays launched years ago are also coming to an end. Autonomous vehicle startup Argo AI, which had raised $3.6 billion largely from car manufacturers Ford and Volkswagen, is shutting down due to its inability to attract new investors.

And in the most notable news, Twitter was taken private for $44 billion, a valuation that would not have held up in the current market. 

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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 Nov. 4, 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

  1. Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding counts increasing by higher proportions after the end of a quarter.

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