Venture capital at 2017 levels
Transactions in 2023 totalled 29,303 globally, the lowest for six years. On the exit front, 200 fund-backed start-ups went to listing
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Key points
3' min read
Hand back six years. The global venture capital industry returned to 2017 levels over the course of last year: deals fell to 29,303 (-30%) for a total amount of USD 248.4 billion (-42%), the lowest in six years. The downturn was generalised across geographies and affected all sectors. Particularly fintech and retail tech showed signs of resilience in the fourth quarter, according to Cb Insights' 260-page report.
The slow US locomotive
.A breakdown by geographic region shows how the US locomotive failed during 2023: deal volume fell to its lowest level in a decade. US-based companies made only 2,182 deals in the fourth quarter of 2023, down 21 per cent to the lowest level since 2013. "The downturn in venture capital has had a deterrent effect on the US tech ecosystem," comment analysts at Cb Insights, who say that weighing on the year's results was also a downsizing of late stage deals and the number of maga deals.
Mega-deal shortage
.In detail, the size of late-stage rounds has decreased by more than 50 per cent since 2021. "Investors have become more selective and are avoiding large late-stage rounds," note the analysts, who add: "Investors are also shifting their portfolios towards early stage companies. By 2023, the share of early-stage funding of start-ups reached a recent high of 65% in the US. In Silicon Valley, as high as 74%, or about three out of every four deals'.
So much so that the average deal size of 'mature' start-ups fell to $21m, a far cry from the $50m of two years earlier. At the same time, the number of mega rounds (deals worth more than $100m) in Q4 2023 fell to its lowest level since 2017. Even investors such as Tiger Global Management and SoftBank, which have historically supported late-stage start-ups with mega rounds in 2021 (500 deals in all), have drastically reduced their commitment (only 46 deals in 2023 in two).
Few unicorns in 2023
.The direct consequence of this was a sharp slowdown in the emergence of new unicorns (start-ups with a valuation of more than USD 1 billion): 71 new unicorns were registered last year, a figure at a seven-year low and down 73% from 2022. The fourth quarter of the year, however, saw an acceleration (23 start-ups reached a billion-dollar valuation compared to 14 in the third quarter), which bodes well for a recovery during 2024.
