Despite AI Frenzy, Venture Capital Funding Dives Globally In The First Half Of ‘23
Only within the first six months of 2023, Venture capital funding almost halved globally, as shown in a data by research firm PitchBook. They highlighted a severe lack of enthusiasm on the side of the investors, along with less demand despite sharply higher interest rates.
A 48% decrease in investment to $173.9 billion and a 29% drop off in deal numbers have been seen despite the active interest in artificial intelligence set up alongside the colossal success of ChatGPT by OpenAI.
In the last six months, investors have invested approximately more than $40 billion in AI startups, as per the data showed.
The investments were made by tech giants like $10 billion by Microsoft in OpenAI and $13 billion as funds for its rival Inflection AI.
Regarding regions, the biggest drop was seen in Latin America, with an 86% drop, while Europe and the U.S. dropped by 69% and 65%, respectively.
Investors claimed that the higher interest rates have made them rethink the valuations. Alongside that, the recent IPO draught and a lack of other exit scopes are the reasons behind their selectiveness.
“ I haven’t written any checks in the past 18 months,” Kevin Colleran, a co-founder at early-stage firm Slow Ventures, said. “ I have 30 portfolio companies that I need to help figure out how to survive. There is no point for me to add to the misery.”
Pitchbook also claimed that big investors were not actively engaging in venture funding, and deal values that were pushed to records by outsized deals were not happening anymore.
In 2021, venture capital funding had globally hit an annual record of $745.1 billion.
“More companies will have run low cash and will need to come to market to fully finance their plans,”
Mary D’Onofrio, partner at Bessemer Venture Partners, said.
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