Global Venture’s funding was leveled in May 2023 despite large increases in AI

Over the past two months, global venture financing has stabilized above the $20 billion mark as investors continue to ease the pace of funding.

Global funding nearly reached $22 billion in May 2023, slightly month-over-month and down significantly, about 44%, from May 2022, Crunchbase data shows.

The funding setback impacted all three phases of seed, early stage and late-stage venture funding, with each phase declining between 41% and 48% in a year-over-year comparison. And despite big funding rounds for AI startups in May, investor interest in the tech hasn’t been strong enough to change the big picture.

For new unicorns in May, we have 10 companies double the number for April, but far fewer than the 34 new unicorns that joined the board in May 2022. This is the first month since November 2022 that new unicorns reach a low double digits.

This reduced funding environment shows a massive decline from 2021 and the first half of 2022. The current monthly funding is in line with the amounts observed in the years 2018 to 2020 which had increased from previous years.

Ecommerce game

However, billion-dollar funding is still ongoing in 2023. The largest funding last month went to Singapore-based fast-fashion retailer Shein, albeit at a reduced valuation. The company raised $2 billion at a $66 billion valuation, cutting a third of its value from its 2021 funding when it was valued at $100 billion. It had revenue of $22.7 billion in 2022 and remained the fourth most valued private company on the Crunchbase Unicorn Board with ByteDance, owner of TikTok, the most valued private company.

Leverage AI

One improving trend is investment in AI companies. Out of 38 new unicorns in 2023, AI firms account for eight new unicorns, including two from last month. Toronto-based Cohere is a competitor to ChatGPT, which builds large language models that companies can integrate to build products. Runway is a New York-based generative AI video automation platform.

Other AI companies that raised big rounds in May 2023 include Anthropic, Builder.ai, CoreWeave and Lightmatter.

However, the interest in financing AI companies is not enough to change the general climate of macro financing. About 13% of total funding in May went to companies marked AI.

The market turns

Leading AI chip supplier Nvidia first approached the $1 trillion mark in May 2023, more than 20 years after going public at $676 million in 1999.

Apple and Microsoft also saw their shares rise, in line with their peak values, over the past month. Other trillion-dollar behemoths Amazon and Google are down from their 2021 peaks.

So, are we in a bubble or a recession? This question was asked by Crunchbase News reporter Joanna Glasner. The dot-com crash of 2000 wiped out the asset class, and it took the Nasdaq 15 years to recover from the bubble. After the 2008-2009 financial crisis, the value of technology stocks returned to growth within two years of the recession.

In 2021, tech stocks rallied sharply, a pandemic-driven surge with cloud services leading the way, and many tech companies experienced unprecedented growth and garnered high valuations.

The following year, of course, saw a dramatic decline in funding for tech startups. But despite the Nasdaq’s recent rally, May’s funding data suggests the rally looks more protracted as investors tread carefully.

Methodology

The funding rounds included in this report are seed, angel, venture, corporate-venture, and private equity rounds in venture-backed companies. This reflects data in Crunchbase as of June 5, 2023.

Note that data lags are most pronounced in the early stages of venture capital activity, with seed funding amounts increasing significantly after the end of a quarter.

Please note that all financing values ​​are in US dollars unless otherwise specified. Crunchbase converts foreign currencies to US dollars at the prevailing spot rate on the date funding rounds, acquisitions, IPOs and other financial events are reported. While these events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historical spot price.

Glossary of financing terms

We’ve made a change to how we include corporate funding rounds in our reports as of January 2023. Corporate rounds are only included if a company has raised seed equity funding through a series of venture funding round capital.

The suit and angel consist of suit, pre-suit and angel rounds. Crunchbase also includes Unknown Series adventure rounds, equity crowdfunding, and convertible notes at $3 million (USD or USD equivalent as converted) or less.

The initial stage consists of Series A and Series B rounds, as well as other types of rounds. Crunchbase includes venture rounds of unknown series, corporate ventures, and other rounds above $3 million and those below or equal to $15 million.

The advanced stage consists of C-series, D-series, E-series, and successive letter adventure rounds following the series [Letter] naming convention. Risk rounds of unknown series, corporate initiatives and other rounds exceeding $15 million are also included.

Tech Growth is a private equity round raised by a company that has previously raised a venture capital round. (So ​​basically any round of the previously defined phases.)

Illustration: Dom Guzman