The value of venture capital (VC) deals in the US last year fell to levels not seen since 2019, according to new year-end data highlighting startups’ chaotic 2023.
Over the last 12 months, investors poured money into artificial intelligence startups, but the rest of the industry foundered. According to early data released by research firm PitchBook on Thursday, venture capitalists invested US$170.6 billion in the US in 2023, over an estimated roughly 15,000 deals. That deal value is down by about 30% from 2022.
The VC industry also declined globally last year. Around the world, investors put US$345.7 billion into startups, down 35% from what they spent last year and the lowest outlay since 2017.
Venture capital is an influential part of the global business ecosystem. Bets from VCs helped nurture transformative companies including Amazon.com Inc., Google and OpenAI. How venture dollars are raised and invested has an outsize impact on growth and innovation.
But spending has fallen precipitously since the pandemic boom times of 2021. “Everything is trying to find a balance,” said Kyle Stanford, venture capital analyst at PitchBook. Stanford said that the industry is still coming off recent years’ highs. Though VC dollars are typically only spent on companies that have a strong chance of becoming very large, there are currently about 54,000 venture-backed companies in the US, he said, a number he called “too many.”
Fundraising for VCs also fell last year. Money raised by US venture investors declined by almost two-thirds from 2022, and by almost half globally. US venture funds raised US$66.9 billion in 2023, and globally funds raised US$160.9 billion.
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The decline for the fourth quarter was less stark than for the year as a whole, reflecting trouble that started in late 2022. For the fourth quarter, US venture deals totalled $37.5 billion, down slightly from US$39.8 billion a year earlier. Globally, venture deals totalled US$76.6 billion in the quarter, down from US$94 billion a year earlier.
One small bright spot was Latin American VC firms. In that region, while deal value fell to US$4 billion — a dip of more than half from the previous year — VC fundraising rose by more than 40% to reach US$2 billion. One notable entrant in the region last year was Bicycle Capital, a firm started by former SoftBank Group Corp. executives Marcelo Claure and Shu Nyatta, which announced a US$500 million Latin America fund.
