$143bn to $84bn: Are we Experiencing the Great VC Cool Down?

Over the last year, numbers have been on the rise everywhere

The cost of living, inflation, responses to global disruption and conflicts.

But, maybe not for VC investment in digital and startups.

Investment is still happening, but not at the pace we experienced in 2021.

Dealroom’s latest wrap-up of global venture capital reflects on investment in Q2 2023. How does it compare to 12 months ago?

Overall global VC investment in tech start-ups

Last year’s report hinted that start-up funding was declining. Now, the most recent quarter confirms the slowdown has continued: figures are on the decline.

2023 funding stats show a steady, continuous decline. Q2 2022 boasted VC investment at $143bn, whereas a year later, it’s plummeted to $84bn. Although this is still a lot of money, it highlights a significant decline in just one year.

What about European start-ups?

The top VC investor countries this quarter were the US ($35.3bn), China ($13bn) and the UK ($4.5bn). When looking at Europe, investment shows a similar trend: a significant fall compared to last year. Despite the $2bn increase from Q1 2023, it is still a long way off last year's Q2, at $30bn, and then Q2 2021 peak, at $37bn.

Meanwhile, US startup funding continues to fall. Since 2021’s Q4 peak of $104bn, figures have fallen each year, only seeing a bump in Q1 2022, after the grand arrival of Open AI.

With the investment boom gone, what’s left to invest in?

What’s to say that users – with technologies like OpenAI – don’t use the tool to try and recreate something on their own? Instead of seeking funding, sourcing knowledge and starting from scratch, let the AI do it for them!

Building on this year’s Q2, $31bn has been invested in breakout stage start-ups – down 51% from its 2021 peak.

As a result of the funding peaks, unicorn patterns follow: 2021 saw the creation of approximately 750+ unicorns – which equates to two per day.  

However, this year’s Q2 showed the birth of only 16 unicorns: that’s 43 this year across Health, FinTech, Marketing, Energy, Food, Enterprise Software, Semiconductors, Media and Transportation.

What next?

Climate tech and deep tech dominate the fastest-growing segments. It’s understandable that VCs are targeting these areas, as we live in a time of great global and economic uncertainty; supply chain issues; war and global disruption; political issues; greenwashing; global warming and more.

So, the question that remains is, have we already experienced the great VC boom?

Need some advice on raising capital and positioning yourself in the procurement technology market? Explore insights from PeakSpan Capital, to help kickstart your funding journey.

Read the full Q2 2023 report here.

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