Silicon Valley Startups Face Funding Challenges, Marking Lowest Year Since 2019

Globally, the VC industry also experienced a downturn, witnessing a 35% decrease in investment to $345.7 billion, marking the lowest figure since 2017. Highlighting the significance of venture capital, PitchBook noted its role in nurturing transformative companies like Amazon.com Inc., Google, and OpenAI, impacting growth and innovation significantly.

Kyle Stanford, a venture capital analyst at PitchBook, expressed, “Everything is trying to find a balance,” acknowledging the industry’s efforts to recalibrate post the pandemic-induced surge in 2021. Despite VC investments usually targeting companies with potential for substantial growth, Stanford noted an excess with about 54,000 venture-backed companies in the US, terming it “too many.”

The fundraising scenario for VCs mirrored the decline in investments. US venture investors raised $66.9 billion in 2023, almost two-thirds less than 2022, while global funds totaled $160.9 billion, nearly halving from the previous year.

Although the overall decline was notable throughout the year, the fourth quarter saw a slightly less drastic reduction compared to the year’s entirety. In Q4, US venture deals were at $37.5 billion, a minor drop from $39.8 billion the previous year. Globally, Q4 witnessed $76.6 billion in venture deals, down from $94 billion a year earlier.

One positive note emerged from Latin American VC firms despite the overall decline. While deal value in the region fell by over half to $4 billion, VC fundraising surged by more than 40%, reaching $2 billion. An important addition to the region’s landscape was Bicycle Capital, initiated by former SoftBank Group Corp. executives Marcelo Claure and Shu Nyatta, announcing a $500 million Latin America fund.