Global startup funding declined to the lows last seen in 2018, illustrating a 38% drop year-on-year.

Crunchbase most recent VC funding data showed that global startup investment in 2023 reached $285 billion — a 38% decline year over year, down from the $462 billion invested in 2022.

More precisely, early-stage funding in 2023 was down more than 40% year over year, late-stage declined by 37%, and seed funding went down just over 30%.

The 2023 funding level is the lowest registered in the last five years. At the same time, when compared to pre-pandemic investment t levels, overall funding in 2023 was down by less than 20%.

The general decline took place on the background of the fall in tech stocks, a slowdown of the initial public offering (IPO) market, and the general investment tendency to hold back and stick to less risky portfolio strategies.

Because of the subdued funding, valuations set in 2021 did not hold up in 2023. Most promising companies raised flat and down funding rounds.

The United States remained the largest startup investment market in 2023, accounting for about half of all venture funding. Nevertheless, funding to United States-based startups in 2023 totalled $138 billion, also down by 37% year over year.

Despite the global investment downturn, certain segments appeared as bright spots in a gloomy VC funding picture. For instance, artificial intelligence (AI) was the largest sector to show a funding increase. Thus, global funding to AI startups reached close to $50 billion last year, up 9% from the $45.8 billion invested in 2022.

The most popular AI foundation model companies OpenAI, Anthropic and Inflection AI collectively raised $18 billion in 2023.

As for other segments, insurtech, semiconductors and battery tech also saw increased investment last year. Meanwhile, manufacturing and cleantech startups were down less than 20% in 2023, significantly less than the average decline.

Notably, the Web3 industry, which saw a surge of funding in 2021 and 2022, fell 73% year over year in 2023, from $28 billion to a mere $7.6 billion.

Financial services funding went down over 50%, e-commerce and shopping saw a decline of 60%, and media and entertainment witnessed a decline of 64%.

According to Crunchbase, the fourth quarter marks the lowest quarter for global venture funding in 2023. It totalled $58 billion, down 24% quarter over quarter and 25% year over year.