Venture capital funding for startup companies will continue to be “constrained” in 2024, barring a burst of initial public offerings (IPOs) from firms that have slowed their plans to go public over the past two years, according to a forecast from financial data provider Crunchbase.
Crunchbase says its statistics show that the subdued funding climate was evident in January, when global startup funding for the first month of the year reached close to $22 billion — slightly below the monthly average for 2023. Funding in January was up from a month before, but mostly because December was the weakest month for venture investment last year. A year-over-year comparison for the month of January also showed that funding last month fell in large part due to its comparison to a jump in funding a year earlier, when Microsoft committed a whopping $10 billion to the Silicon Valley artificial intelligence firm OpenAI, parent company of the popular generative AI tool Chat GPT.
Another measure of investors’ tentative mood is that many firms have struggled to raise new funds at their previous valuations, as investment firms now demand larger ownership stakes in the startups for their money. An example of such a “down round” was seen when VC firm Andreessen Horowitz led a $75 million round that valued Quora at $500 million, far below its $1.8 billion valuation in 2017. Despite that overall trend, Crunchbase also found a handful of “up rounds” where startups have grown their valuations, such as the financial technology firms Bilt Rewards and DailyPay, sports entertainment company Minute Media, and AI chip startup Rebellions.
Cautious investors are also keeping an eye on recent layoffs in the tech sector, seen both at public companies including Microsoft, Salesforce, PayPal, and Unity and at large private companies like Brex, Discord, and logistics tech firm Flexport. According to the Crunchbase, at least 17,000 U.S. tech workers lost their jobs last month. But although that’s high, it’s a sliver of the more than 65,000 U.S. tech workers who lost their jobs a year earlier in January 2023, the company said.
