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January 04, 2024 | Tom Ballard

Last year was lowest for venture funding since 2018

While their numbers vary, data compiled by Crunchbase and PitchBook-NVCA Venture Monitor tell a story of a challenging year.

Two different organizations that regularly track and report trends in venture capital (VC) have reported on just how much headwind start-ups encountered in their quest to raise investment dollars in 2023 and, while their numbers are different, the results are strikingly similar.

Crunchbase data shows that 2023 is on pace to be the lowest for VC funding since 2018. Global start-up investment during the calendar year reached $285 billion — marking a 38 percent decline year over year, down from the $462 billion invested in 2022. Separately, according to the PitchBook-NVCA Venture Monitor First Look data packs, global VC funding fell to roughly $345 billion, down from $531 billion in 2022, a 35 percent decline.

According to this analysis written by Gené Teare of Crunchbase,  most industries were down year over year. Artificial intelligence (AI) was the largest sector to show an increase. Global funding to AI start-ups reached close to $50 billion last year, up nine percent from the $45.8 billion invested in 2022. As might be expected, the largest investments in 2023 went to foundation model companies OpenAIAnthropic, and Inflection AI, which collectively raised $18 billion in 2023. Insurtech, semiconductors, and battery tech also all saw increased investment in 2023.

Teare writes that two industries, however, stood out as performing better than broader market declines. Manufacturing and cleantech start-ups were down in 2023 year-over-year (YoY), but by less than 20 percent. Web3, which experienced a runup in 2021 and into 2022, fell 73 percent year YoY in 2023, from $28 billion to $7.6 billion. Other leading sectors that were down year-over-year included financial services (down over 50 percent), e-commerce and shopping (down 60 percent), and media and entertainment (down 64 percent).

What does 2024 portend for Tennessee-based start-ups? Look for our annual “Investor Outlook Series” that begins posting on January 16.

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