23 January, 2024
State of Venturing in 2023

CBINSIGHTS  relaesed their report on venturing in 2023. The venture market was in shambles in 2023. Funding fell 42% YoY, deals plummeted to a 6-year low, and unicorn births tumbled to their lowest levels since 2016. Q4’23 was the harshest quarter for global VC in 6 years. However, the down market has revealed a handful of areas that remain notably resilient, from AIand sustainability-focused startups to M&A deal flow in Europe.

A summary of their observations shows the following:

• Venture funding falls to $248.4B in 2023, the lowest since 2017. Global deal volume also tumbled 30% YoY to 29,303 in 2023, a 6-year low. The declines were felt across most major global regions and sectors. However, the fintech and retail tech sectors saw modest gains in funding in Q4'23.
• US deal volume at a 10-year low. The venture downturn has had a chilling effect on the US tech ecosystem. US-based companies raised just 2,182 equity deals in Q4’23 — down 21% QoQ to the lowest quarterly level since 2013.
• Late-stage deal size has fallen more than 50% since 2021. Investors have become more selective and are shying away from large, late-stage rounds. The median late-stage deal size is now $21M, a far cry from 2021’s $50M. Similarly, the number of mega-rounds (deals worth $100M+) in Q4’23 fell to its lowest level since 2017.
• Fewest annual VC-backed IPOs since 2013. With less than 200 VC-backed IPOs globally in 2023, the market for VC-backed IPOs remains mostly closed, especially in the US. Meanwhile, at 8,351 deals in 2023, M&A volume has fallen from a 2021 peak but remains elevated historically.
• 2023 sees 71 new unicorns — a 7-year low, and down 73% from 2022. The number of private companies reaching $1B+ valuations remains well below where it was even before the pandemic. However, 23 hit that mark in Q4’23, a rebound from the previous quarter’s 14. Among 2023’s new unicorns, roughly half (35) came from the US. Asia and Europe contributed 18 and 12, respectively.
• Generative AI and sustainability tech companies take the majority of top deals in Q4’23. Investors are looking to ride the AI wave to potentially substantial long-term returns. This is fueling a funding frenzy among generative AI developers, which dominated the list of top equity deals in Q4’23, alongside sustainability tech players.