VC funding dropped to $18 billion last month

Last month, VC funding hit a three-year low.

The global monthly funding total fell to $18 billion—the lowest it’s been since February 2020, according to a new Crunchbase report. It was down 63% year over year—from $48.8 billion in February 2022—and the late-stage funding sector saw the biggest decline.

“My biggest takeaway is, in speaking with investors, is that there’s the sense that late-stage funding is in peril, or late-stage funding is really going away,” Gené Teare, senior data editor at Crunchbase, told us, adding, “If you look at every funding stage, it’s down, but late-stage is the most at risk.”

She later added, “If you don’t have to raise in this funding climate, you wouldn’t go out to raise, just because valuations are down.”

Top-up rounds

But Teare said her team has seen more companies raise extension rounds—especially if they need extra money to carry them through to their next big milestone or larger-scale funding round, in a presumably less challenging funding environment.

“Typically, you raise rounds every 18 to 24 months, and we were seeing companies raise more often…some more at 12 to 18 months…largely because they could in this funding environment,” Teare said. “What we’ve seen now is that, broadly, for the tech industry, that companies are not able to raise…that next big master round, and so they’re raising extensions…funding to sort of tide over that company for the next 12 to 18 months, to get them through to a funding environment which is a little bit stronger.”

One sector that’s on the up-and-up: AI, partly due to increased investor interest in generative AI tools like ChatGPT and Bard. Companies in the AI space are raising at high valuations, Teare said, but despite the spike, the sector wasn’t enough to buoy the rest of the tech industry’s numbers.

Conversely, the Web3, blockchain, and crypto categories are potentially “the biggest decline that we’ve seen in our dataset,” Teare said.

Looking ahead

Across the board, investors seem to be choosier about their investments, and since the “heat has gone away from the market…it’s just a much more selective funding environment overall,” Teare said.

So if you’re looking for investor attention in 2023, it may be better to be an early-stage company—especially since some VCs are sitting on significant funds to deploy, Teare said. For instance, she noted that Bain Capital and SignalFire recently raised $2.4 billion and $900 million, respectively.

“Every single funding stage is down from the peaks of 2021, but I think seed funding has stayed the most robust—it’s the least impacted by what’s happening—and then…Series A is stronger than Series B,” Teare said, adding, “It’ll be interesting to see how that market—the newer companies being formed…what those valuations and what those round sizes look like into 2023.”