US tech startup funding sank during Q1 2023 in contrast to the first quarter of 2022.
According to a report, tech startup funding delivered the lowest amount of money in the past three years in Q4 2022. According to the report by Tracxn, Q4 2021 was the most funded quarter in the past decade.
Tech startups are said to have raised a total of $38.4 billion in Q1 2023, a drop of 44% from $68.2 billion in Q1 2022. If you are looking for a silver lining, Q1 2023 is 26% higher than the $30.5 billion raised in Q4 2022.
Early-stage funding worth $11.5 billion was booked during Q1 2023, a fall of 12% and 51% when compared with Q4 2022 and Q1 2022, respectively. The increase from Q4 2022 to Q1 2023 was due to later-stage firms raising capital.
Seed-stage funding also decreased by 43% when compared with Q1 2022 and fell from $2 billion in Q4 2022 to $1.6 billion in Q1 2023.
Top funding sectors include Enterprise Applications, Fintech, and Life Sciences.
Firms in the Enterprise Applications space raised $20.4 billion in Q1 of 2023, 63% higher than in Q4 of 2022. In the first three months of 2023, Fintech companies gained $10 billion in Q1 2023, 59% higher than Q4 2022 but a drop of 34% from Q1 2022.
In Q1 2023, the number of $100 million+ rounds was 59, of which seven companies raised over $500 million.
As for geography, San Francisco remains on top at $19.8 billion raised in Q1 2023, followed by New York City at $2.9 billion and Boston at $864 million.
The decline in access to capital should put policymakers on notice as the economy is slowing dramatically. Unfortunately, inflation remains stubbornly high as the current administration has been fighting the Fed with an exceptional amount of government expenditures stimulating the economy.