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Hands back six years. The venture capital industry globally returned to 2017 levels last year: operations fell to 29,303 (-30%) for a total amount of 248.4 billion dollars (-42%), the minimum in 6 years. The decline was generalized across different geographies and affected almost all sectors. Fintech and retail tech especially showed signs of holding up in the fourth quarter, according to the 260-page report by CB Insights.
The slow locomotive Usa
From the breakdown by geographical area it emerges that during 2023 the United States‘ locomotive disappeared: the deal volume fell to the lowest level in the last ten years. Companies based in the United States achieved only 2,182 in the fourth quarter of 2023, down 21% to the lowest level since 2013. «The decline in venture capital has had a dissuasive effect on the US technology ecosystem» comment analysts at CB Insights, according to which a reduction in late stage operations and the number of magic deals also weighed on the year’s results.
The lack of mega-deals
In detail, the size of late stage rounds has decreased by more than 50% compared to 2021. «Investors have become more selective and are avoiding large late stage rounds» observe the analysts, who add: «Investors are also moving the own portfolios towards early stage companies. During 2023, the share of early-stage funding for startups reached a recent high of 65% in the United States. In Silicon Valley, as much as 74%, or about three out of four operations.”
So much so that the average size of “mature” start-up operations fell to 21 million dollars, a far cry from the 50 million dollars of two years earlier. At the same time, the number of mega rounds (deals worth more than $100 million) in the fourth quarter of 2023 fell to the lowest level since 2017. Even investors such as Tiger Global Management and SoftBank, which have historically supported startups in an advanced stage with mega rounds in 2021 (500 deals in total), they have drastically reduced their commitment (only 46 deals in 2023 between two).
Who are startup investors?
Few unicorns in 2023
The direct consequence was a sharp slowdown in the birth of new unicorns (start-ups with a valuation over one billion dollars): last year there were 71 new unicorns, a figure at a seven-year low and down by 73%. % compared to 2022. The fourth quarter of the year, however, saw an acceleration (23 startups reached the valuation of one billion against 14 in the third quarter), which bodes well for a recovery during 2024.