US Tech Startups Experience a Tough Year, See Lowest Funding in Five Years

(Tracxn Geo Annual Report: US Tech 2023)

USA, December 12, 2023 /EINPresswire.com/ -- US Tech Startups Experience a Tough Year, See Lowest Funding in Five Years

(Tracxn Geo Annual Report: US Tech 2023)


Highlights:
-Total funding into US Tech startups dropped 41% to $107B in 2023, compared with $182B in 2022
-Five companies reported funding rounds that were $1 billion+
-In 2023, 1263 acquisitions and 34 IPOs took place
-San Francisco ( $32.1B) took the lead in terms of city-wise funding
-Enterprise Applications, FinTech, and Life Sciences were the top-performing sectors in 2023

US, December 12, 2023: Tracxn, a leading global SaaS-based market intelligence platform, has released its Geo Annual Report: US Tech 2023. The report, based on Tracxn’s extensive database, provides insights into the US Tech space.

Total funding in the US Tech space fell by 41% to $107.1 billion in 2023 YTD (till December 5, 2023) from $182 billion in the same period in 2022. This decline was largely due to a significant drop in late-stage and early-stage investments this year.

Late-stage funding in this sector in 2023 YTD fell 40% to $59 billion as compared with the same period last year. Early-stage investments plunged 43% to $41.3 billion in 2023 YTD, from $72.1 billion raised in the same period in 2022. Seed-stage investments stood at $6.7 billion in 2023 YTD, 37% lower than the $10.6 billion raised in the same period in 2022.

Q4 2023 has become the least funded quarter in this space in the last five years, whereas Q4 of 2021 was the highest funded quarter. US Tech startups have so far secured funding worth $15 billion in the last quarter of 2023, a sharp contrast from $40 billion raised in Q1 2023.

The number of $100 million+ rounds, too, saw a decline of 60% from 460 in 2022 to 186 in 2023. Only 17 rounds were worth $500 million and higher, as against 22 such rounds in 2022. Five companies - Open AI, Stripe, Inflection, JUUL and Redwood Materials - managed to raise funds of $1 billion and higher, compared with eight such rounds in 2022.

Enterprise Applications, Life Sciences and FinTech were the top-performing segments in the overall US Tech sector. However, even these segments witnessed a downward trend in funding in 2023.

The Enterprise Application sector has witnessed total funding of $49.4 billion in 2023, a drop of 42% from $85.97 billion raised in 2022. US FinTech companies attracted investments worth $18.2 billion in 2023, 36% lower than the $28.7 billion raised in 2022. Funding in the Life Sciences segment fell from $27 billion in 2022 to $18.8 billion in 2023.

The overall US Tech space witnessed 1263 acquisitions in 2023, the lowest since 2014. However, the average acquisition price in 2023 stood at $1.48 billion, the second highest after 2022. The number of acquisitions recorded in this sector was 1841 and 2421 in 2022 and 2021 respectively. Only 34 US Tech companies went public in 2023, a sharp contrast from 68 IPOs in 2022 and 325 IPOs in 2021.

Among US cities, San Francisco, New York City and Palo Alto were the top-funded cities in 2023. US Tech companies based in San Francisco attracted investments worth $32.1 billion, while those headquartered in New York City and Palo Alto raised $9 billion and $4.2 billion, respectively.

Y Combinator, Techstars and New Enterprise Associates are the most active investors in the US Tech space. Y Combinator, Gener8tor and Techstars were the lead VCs in terms of seed-stage investments, while General Catalyst, Khosla Ventures and Google Ventures were the most active VCs in the early stage. Sapphire Ventures, Iconiq Capital, and CapitalG were the leading investors in terms of late-stage funding.

With the rise in inflation, interest rates and other macroeconomic conditions, activity across industries has been slow, making it challenging for the startup ecosystem. The country's GDP in Q3 2023 has risen by 5.2%, a little higher than the estimates indicating positive growth in economic activity and we expect this can have a positive impact on the investment trend.


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Lakshmitha Raj
Manager PR and Corporate Communications
Tracxn Technologies Ltd.
Bangalore, India
Email: [email protected]
Mobile: +91 8882133433
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Lakshmitha Raj
Tracxn Technologies Limited
+91 8882133433
email us here