Despite high interest rates and concerns of a looming recession dominating most conversations surrounding venture capital funding, First Coast tech companies and startups still managed to have a strong a year.
At least 30 companies headquartered on the First Coast reported combined funding of more than $1.4 billion in 2023, according to investment and funding tracker Crunchbase.
Despite the historically strong year, 2023's financing is down about 55% from 2022's $3.4 billion record. However, when looking at the past two years in historical perspective, it illustrates just how unique the funding scene is: Companies on the First Coast reported only $700 million in funding in 2021 and merely $30 million in 2020, according to Crunchbase's latest dataset.
Not all financial considerations are reported and some independent financing flies under the radar, but the breadth of the trend points to a successful tech and startup scene on the First Coast; that although, has slowed it is still outperforming the previous decade's performance by orders of magnitude.
Although the bulk of the funds raised were by large, public companies on the First Coast such as CSX [NASDAQ: CSX], Dream Finders Homes [NASDAQ: DFH] and Rayonier Advanced Materials [NYSE: RYAM], many smaller startups and tech firms managed to snag more than $300 million of the $1.4 billion pot.
Most notably, Jacksonville-based IQ Fiber scored the fourth largest investment ($150 million) this year. IQ Fiber said it plans to use the additional funds to continue to aggressively expand its network as it is already on track to deliver its Phase 1 target of 60,000 serviceable homes across metro Jacksonville and four counties in Northeast Florida.
Other smaller tech and startups like NYMBUS, Operade, Urban SDK, Rethreaded, Nebula Energy and Smarter Remodeling were also successful raising funds in 2023.
Looking Ahead
Venture capital fundraising activity for startups has been down over the last five to six quarters, and it could continue to be a tough environment over the next several months, said Rahul Baig, head of venture capital coverage at Wells Fargo & Co. (NYSE: WFC).
“It's hard, there's no question about it,” he said at the RevTech Labs’ Venture 135 conference in Charlotte recently. “It's going to be a very tough six, seven months until we rebalance where we are, and we will get to see the other side of this pain.”
VC firms across the globe raised $221 billion in the first three quarters of this year, a 42% decline year-over-year, according to Crunchbase. And 2023 is on track to see the least amount of venture capital raised in the U.S. since 2017, according to a report by American Inno last month.
With VC firns struggling to attract new money, not only are new investments in jeopardy but existing companies looking for further capital to lengthen their operating runway may also face problems in 2024.
Startups were expected to face a so-called mass extinction event this year, but relatively few have actually shut down. An inevitable wave of emergency financings on unfavorable terms or shutdowns might be on the horizon, though.
Two years into the venture capital slowdown, many startups could be steadily heading toward a financial cliff that has simply been delayed, according to a recent report from PitchBook and the National Venture Capital Association.
"Looking forward, the future of many venture-growth startups hangs in limbo. Many startups that raised financing rounds at the height of 2021 now find themselves trapped in a much harsher fundraising environment when subsequently seeking follow-on rounds," the PitchBook-NVCA report says. "Cash runways can only last so long, and staying private is a privilege. Assuming the lackluster exit environment and current trends persist, we are likely to see a large wave of down rounds and shutdowns in coming quarters."
During the first year of the Covid-19 pandemic, more than 900 startups shut down around the world, according to Crunchbase.
Symone Graham and Sara Bloomberg contributed to this report.
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