Venture and growth investors in private companies scaled back their investment pace significantly in the latter half of 2022, signaling a slower funding climate as we begin 2023.

To be fair, 2021 was a tough act to follow. Fast-growing startups were showered with capital, and tech firms went public at high valuations. Acronyms like SPAC and NFT were golden tickets to cash. Every type of investor had a role to play and there was every reason to believe the lavish show would go on in 2022.

But last year鈥檚 funding numbers said otherwise. Global venture funding in 2022 reached $445 billion 鈥� marking a 35% decline year over year from the $681 billion invested in 2021 鈥� according to an analysis of 附近上门 data. But despite the slower funding environment in 2022, investors spent $100 billion more last year than the $342 billion invested in 2020.听

Indications that 2021 might be an outlier amid global funding鈥檚 more measured rise over the years instead of a new, heady normal, developed fairly quickly in 2022. The stock market鈥檚 fall, mass tech layoffs and crypto鈥檚 collapse left many investors and startups struggling to match 2021鈥檚 successes. Suddenly $445 billion of global venture funding in a year doesn鈥檛 look so bad.

Table of Contents

• Quarterly down
• Seed funding
• Early-stage funding
• Late-stage funding
• Unicorn pace slows
• A reckoning
• Methodology
• Glossary of funding terms

Quarterly down

Much of the 2022 decline was weighted in the second half of the year. Funding in the fourth quarter was marginally below the third quarter, which had already declined significantly, particularly at late-stage financings.听

Fourth-quarter funding totaled $77 billion 鈥斅燿own 6% quarter over quarter and 59% year over year 鈥斅爉aking it the lowest since the first quarter of 2020, when $70 billion was invested.听

As each funding stage attracts distinct investors, and is impacted in different ways through the downturn, let鈥檚 review funding for each quarter by stage.听

Seed funding

Seed funding was the least impacted funding stage through last year鈥檚 downturn.听

The fourth quarter was the first quarter in 2022 when seed-stage funding fell in a year-over-year comparison. Seed funding totaled $7 billion in Q4, down 35% year over year. The third quarter in 2022 was flat year over year, but the first two quarters were higher than a year earlier.听

Early-stage funding

Early-stage funding totaled $31 billion in Q4, down by 54% year over year. The third quarter was also a much slower funding quarter, down 39% year over year. Prior to that, the first quarter was up and the second quarter down by less than 10% compared to a year earlier.

Series B fundings were down by a greater percentage than Series A fundings these past two quarters.听

Late-stage funding

The pullback in late-stage funding started in the second quarter of 2022 and continued through each consecutive quarter.听

Late-stage and technology growth funding was $40 billion, down 64% year over year for this past quarter, from $110 billion in Q4 2021, and flat quarter over quarter according to an analysis of 附近上门 data.

Unicorn pace slows

As expected, unicorn creation also slowed in Q4, when just 22 new unicorn companies joined The 附近上门 附近上门. That鈥檚 below the lowest quarterly count since the first quarter of 2020 with 23 new unicorns.听

New unicorns in peak quarters in 2021 numbered over 150 companies joining per quarter.听

A reckoning

The venture industry faced a reckoning in 2022.听

In the pandemic-heavy days of 2021, startups growing the fastest were rewarded with abundant capital. A record number of technology startups went public well above their last private valuations and soared on listing. Momentum for special-purpose acquisition company IPOs peaked and . Thousands of buyers bought NFTs valued in the millions of dollars. And Bitcoin peaked at $65,000 in November 2021.听

Capital to private companies came from an array of investors; venture firms with bigger pockets, sovereign wealth funds, private equity and hedge funds committed more to private tech, and corporate investors leaned into innovation in part by funding innovative tech companies.听

As we entered 2022, the stock market crashed and spiraling public valuations put pressure on private company values. As capital became more expensive, conserving cash and demonstrating unit economics was advised by investors across the spectrum over the months that followed.听

The market for NFTs slid, crypto dropped 鈥� and has not emerged as a technology with a strong use case, outside of a store of value.听

The 鈥淕reat Resignation鈥� theme of 2021 turned on a dime in 2022 as broad layoffs hit across large and small public and private tech companies.

And the myth of the cleverest investor in the room was punctured with the collapse of eviscerating $38 billion in value.听

Even artificial intelligence seemed to fall short of its potential with the closure of , a self-driving technology company that was unable to raise further funding despite its backing from聽 and . However, one bright spot in 2022 was the release of projects DALL-E for text to image creation and for conversational AI, an indication of productivity gains to be had from developments in AI.听

The scaling back of late-stage funding will impact startups in 2023 as they prepare to raise funding at Series B and later. Round sizes have already come down, but investors will also be more cautious as a slew of startups 鈥攈aving held back 鈥� get ready to raise.听

Methodology

The data contained in this report comes directly from 附近上门, and is based on reported data. Data reported is as of Jan. 4, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding values are given in U.S. dollars unless otherwise noted. 附近上门 converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to 附近上门 long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. 附近上门 also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. 附近上门 includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the 鈥淪eries [Letter]鈥� naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a 鈥渧enture鈥� round. (So basically, any round from the previously defined stages.)

Illustration:

But instead of leading her pitch to limited partners (LPs) with a reference to gender, she phrases the investment thesis as follows: 鈥淲e鈥檙e going to invest in an underlooked asset class that is overperforming.鈥澛�

鈥淚f it鈥檚 just about [investing] in more female founders, everyone has a different motivation,鈥� Neundorfer said. 鈥淲e don鈥檛 want this to be seen as a nonprofit charity; that鈥檚 not what it is.鈥澛�

As Neundorfer works to raise $20 million for her next fund, there鈥檚 a greater trend in her favor: according to 附近上门 data, over $20 billion has been invested in female-founded and co-founded startups so far in 2019.听

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Of that $20 billion, approximately $5 billion has been invested in female-only founded startups. The remaining $15 billion, according to 附近上门 data, went to startups with female and male co-founders.

The year-to-date numbers put 2019 on track to be the second-best year for dollars invested into startups with a female founder and co-founder, excluding the $14 billion outsized round in 2018 into female-founded Ant Financial.

Neundorfer, like many partners of micro-firms investing in smart women founders, is looking to bet on the next , , or . That in mind, let鈥檚 start with the billion-dollar ideas that happened to be led by female founders this past quarter.

Supergiant Rounds

So far this year 44 supergiant rounds (those of $100 million or more) have gone to female-founded and co-founded companies. That adds up to 11 percent of dollars invested in rounds over $100 million in the quarter.听

Here鈥檚 a look at some of the companies that made up those millions:

• started in Kenya as a financial services startup to help individuals who are underbanked safely save, borrow, and grow money. The company raised a $110 million Series D round in August, as reported by .听听

• and helped start , which connects students around the world to teachers in North America for English lessons. It raised in September, bringing its total known funding .听
• started in Vonore, Tennessee to make biomass supply solutions for bio-based products. for her compostable products made from agricultural materials in July. (The company has .)

Tala was started in 2013; VIPKID began in 2013, and Tiller kicked off Green Energy in 2008. It鈥檚 a reminder that not everyone is Brex, and some supergiant rounds take time to secure.

, a female-led company valued at $1.2 billion dollars, is another example of how long it takes to raise nine-figures. Founder told 附近上门 News that when her company was founded five years ago, 鈥渂eauty wasn鈥檛 a category that many [venture] firms were interested in exploring.鈥� Then 2018 came, and it 鈥渨as a record year for venture funding in the beauty industry.鈥�

She added: 鈥淚 imagine 2019 might break that record again. Beauty, commerce, conversation, and community are all rapidly moving online, and it鈥檚 clear that investors are waking up to the opportunity this creates for a digital-first and customer-centric company like Glossier.鈥澛�

But before became a unicorn, valued at over $1 billion dollars, it had to convince investors it was a valuable bet. To do so, it had to raise smaller rounds when it wasn鈥檛 a household (or dorm room) name. So let鈥檚 unpack the trends around Series A rounds, or the first institutional round of funding a startup can raise.听听

Notable Series A Rounds

Female founded and co-founded companies took home 16 percent of Series A dollars invested in 2019.听

One Series A round that stood out in Q3 2019 was , a marketplace for hospitals to hire qualified nurses with a more efficient matching process. CEO and Co-founder raised round led by . Another was , which helps engineers debug their code. It led by in September. The company is co-founded by CEO and CTO .听

Large Series B Rounds

Looking one step further on the venture maturity chart, female-founded and co-founded companies took home 16 percent of Series B dollars invested in 2019.听

A Series B company to watch is , a biotech startup that develops therapeutics for diseases with no current treatment options. CEO and founder raised t. Another was , a personal assistant app that helps sales teams. It was co-founded by its CEO, . Vymo鈥檚 origins are in India, but it is now setting up offices in New York as well. The company raised led by in July. According to the company, it has 100,000 salespeople at over 50 global enterprises and counting using their mobile app.听

For , Managing Director and Head of Funds at speaking at the Disrupt Women鈥檚 Breakfast, more women in venture would create a domino effect. Currently, around 11 percent of VCs with check-writing ability are women, up from nine percent a couple of years back. Of the 130 active companies in Comcast鈥檚 portfolio, 26 percent have a female co-founder.听

Overall 13 percent Of Invested Dollars Go To Female-founded And Co-Founded Companies

In 2019 through Q3, 13 percent of invested venture capital dollars went to female co-founded startups, up from 10 percent in 2014. The figure, however, is below 2018鈥檚 17 percent.

In 2019 to date, $87 dollars go to male-only founded teams for every $100 invested by VCs. Female-only founded teams are therefore only raising $3 dollars for every hundred dollars spent. Male and female co-founded companies raised $10 dollars for every hundred dollars spent.听

While there are more female-founded and co-founded unicorns than ever before, and therefore proof that there鈥檚 a business in investing in diverse founders, global data doesn鈥檛 yet live up to this trend.听

So far, 2019鈥檚 global deal volume for female-founded and co-founded teams is stable at 19 percent, staying within a 2 percent range from 17 to 19 percent over the last few years.

To Close

So let鈥檚 dial back to where we began: a micro-fund that wants to invest in female founders working on ideas with the potential for impressive returns.听

While the data doesn鈥檛 quite reflect the sort of proportional change we expect — yet — seeds are being planted in a time where we see billion-dollar companies led by women founders. Perhaps in time, the market will catch up to the data that proves it鈥檚 worth investing in 鈥渁n underlooked asset class that is overperforming.鈥�

Methodology: Notes On The Data

The charts and information in this report are based on reported data in 附近上门. In other words, it鈥檚 based on publicly disclosed rounds included in 附近上门 dataset.

For this quarterly report, our analysis is based on announced funding to companies with founders associated. This is in contrast to our overall venture capital report where we use projected data in order to correct for data lags for the most recent quarter. Over time we fully expect more founders to be added to 附近上门, as well as a reporting lag on funding which will be greater for the most recent quarter. For this report we include private company fundings from seed through to late stage venture. We exclude private equity rounds.听

附近上门鈥檚 dataset is constantly expanding, but there are gaps. A company may not have founders listed on its 附近上门 profile. Or 附近上门 might not have a gender listed for founders that are attached to the person鈥檚 附近上门 profile. (Note: In addition to 鈥渕ale鈥� and 鈥渇emale,鈥� 附近上门 has over two dozen other gender tags.) Based on an analysis of current data for this report, more than 80 percent of dollars raised in the last five years are associated with companies that have founders.

附近上门, like all databases of private-market transactions, has a documented pattern of reporting delays. It can sometimes take between weeks to months for some rounds to be announced publicly and subsequently get added to 附近上门. This is especially the case for seed and early-stage deals, which are often raised by companies before the company launches a product, or otherwise gets much outside media coverage which surfaces information about the company鈥檚 funding history. As data is added to 附近上门 over time, some of the numbers in this report may shift slightly.

Seed includes angel, pre-seed, seed, equity crowdfunding, and venture series unknown below $1 million. Venture rounds includes early and late stage venture, and corporate venture. We exclude private equity rounds from this report.听听

滨濒濒耻蝉迟谤补迟颈辞苍:听

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There are scores of China-based unicorns, and some of the country’s biggest names are well-known even where their products aren’t popular. Companies like , , , and others. And then there’s, say, , which is owned by a China-based company and apparently gave us Lil Nas X.

Meme-powered rappers aside, if you care about technology and its good bits (change! innovation! the future!) and its bad bits (surveillance! clustering! podcasts!), China has been a key participant, even driver, of the boom that the venture-backed startup world still finds itself in the midst of.

However, that state of affairs is changing somewhat. Let’s see how.

China Falling

As the following chart shows, China’s share of the world’s supergiant rounds鈥攙enture rounds of $100 million or more鈥攈as fallen from its world-leading position in 2016 to third place today.

Supergiant rounds are the power plays of the unicorn world; by raising nine- and ten-figure rounds, the hottest, and sometimes even the best private technology firms, can avoid going public, operating off-the-radar to some degree while they accrete size. Capital for such companies is a weapon. (Examples include , , and .)

But sometime after seemingly peaking in mid-2018, China went from being the country where the most supergiant rounds were raised to the below state of affairs:

As you can see, the downward trend regarding China’s participation in the supergiant venture space has continued. And now China’s two-quarter moving average (the lines of various color) has dipped to third place.

Losing the supergiant race implies that companies based in China are no longer the most capable at raising late-stage money. This could lead to earlier IPOs from China-based companies or simply slower activity in the Chinese Internet sector; you cannot spend as much as you might want if your next $100 million round might not be there when you need it.

So What

A single country finding itself in third place after the traditional market leader and the rest of the world grouped into a single collective is no sin, of course. As you can tell from the chart, only two countries in the world have had a shot at managing a leading supergiant tally on their own. But for China to fall as far as it has鈥攏ote that China’s Q2 2019 result is lower than what we’ve seen from the country since what looks like late 2015鈥攍ikely tells us two things.

First, China’s rise in the rankings of supergiant rounds was is somewhat connected to its macro condition. Trade tariffs continue to impact the country at the direction of the Trump Administration, and it appears that the startup scene (as measured through venture capital) is slowing as well.

We often discuss the impact of tech stocks (good or ill) on investors deploying capital into similar, private companies. That the macro picture would impact the former, and thus either ding or bolster the latter, makes good sense. Venture data concerning China underscores the point.

Second, China isn’t going to take over the entire world of startups in one go. A few years back, if you spoke with VCs, you would hear impressed comments about China-based companies. Long hours (the dreaded “996” model) and a huge market with strong smartphone penetration and fewer hang-ups around privacy seemed to indicate that China was what’s next.

However, that ignored the fact that China’s population is rapidly aging, cost of living is rising (when compared to other emerging economies), and annual economic growth for the country has been steadily declining since 2012.

For all those reasons, China as a startup hub that is capable of supporting cash-burning enterprises seems less certain.

Illustration: . Data: .