![]() “An immense amount of capital remains trapped in late-stage and venture-growth-stage startups hesitant to gamble on whether their financial performance can withstand the intense scrutiny of the public markets,” found a PitchBook report. The full-year figure is now on track to come in as the lowest of the decade, according to the report. ![]() ![]() Through the first half of the year 2023, people received about $12 billion from 588 separate corporate exits. Other companies are still holding out, but they’re at a standstill while shareholders hope they can ride out the storm and cash out at a later time. Big names like WeWork, which raised $11 billion in funding, and freight startup Convoy which brought in $900 million, have both filed for bankruptcy in the past two months. Some of these firms had previously raised a lot of money. The carnage is so bad that some insiders are calling this an extinction-level event for startups. So far this year, 543 startups on Carta’s platform have shuttered. More startups have shut down in the third quarter of 2023 since Carta began tracking the data almost five years ago. So far this year, nearly 20% of all startups have raised money at a lower valuation than they had previously, according to equity management company Carta. When a company is private, opportunities to sell shares tend to be fewer and farther between. With a lack of both funds and exit opportunities (that’s when shareholders are able to cash out by selling a bunch of stock through an acquisition, IPO, buyout or merger), early stage companies are unable to get started and late stage companies are falling into distress. Venture capital funding for startups across the globe has fallen by more than half since last year, according to new Pitchbook data – the annual fundraising figure for 2023 is pacing towards its lowest level since 2015. So, why would a potential investor stick their neck out for a tech startup when they can get paid to sit on cash instead? Sure, tech titans like Apple, Amazon, Alphabet and Microsoft are doing just fine – but their younger siblings are struggling to stay afloat. That’s the index’s best monthly performance since 1985. The Bloomberg US Aggregate bond index, a widely-tracked benchmark for the performance of US investment-grade bonds, logged a 4.5% return in November. In this environment, money sitting in less risky money markets tends to pay better than high-risk startups. ![]() Valuations soared and unicorn companies, those startups said to be worth $1 billion or more, proliferated.īut now, with high interest rates, an uncertain economic environment and a banking crisis that hit Silicon Valley-adjacent banks hard, there’s been a shortage of funds for early-stage companies and a lack of opportunity for late-stage companies to cash out.įor investors looking to maximize their money, better opportunities exist elsewhere. And the investors who handed out billions of dollars to fund them aren’t very happy about it.ĭuring more flush years, venture capitalists, angel investors and billionaire evangelists poured their cash into tech startups – the easy money pipe was seemingly open to any Tom, Dick or Harry who had an idea and was willing to attach a buzzy phrase like ‘blockchain’ or ‘AI’ to it.
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