The amount of venture capital invested in the Portland metro sank 58.5% in 2023, according to the latest data from the Venture Monitor report.
For the year, $455.1 million was invested across 119 deals, according to the quarterly report put together by research firm Pitchbook and the National Venture Capital Association. For comparison, in 2022 investors pumped $1.1 billion into companies across 145 deals.
This full-year drop in investment volume and the decrease in deals isn’t hugely surprising since the numbers have been trending down all year. It’s also not unique to the Portland metro, which includes Southwest Washington, as the venture industry has faced challenges nationwide.
Nationwide $170.6 billion was invested across 15,766 deals. That’s down from $242.2 billion invested in 2022 across 17,592 deals, according to the Venture Monitor report.
The decline in activity both locally and nationally reflects the changing market, notably the rise in interest rates that can attract investors to less risky bets than startup investing. From January 2009 to February 2022 the average Federal Funds rate was 0.51%, but by the end of 2023 it was 5.33%, wrote NVCA President and CEO Bobby Franklin in the Venture Monitor report.
"Recent statements from Federal Reserve Board of Governors indicate that while rates are unlikely to increase more in the short term, cuts are also unlikely. Furthermore, they have also indicated that while rate cuts are probable, they are likely to be more in line with historical norms (4.6%) than the ultralow rates of the last few decades (1.4%)," Franklin wrote.
Last fall, Eric Rosenfeld, founder of Oregon Venture Fund noted that the drop in VC activity in the Portland metro also reflects the decrease in activity from funds based out of state. Local firms like OVF and others might be active, but their overall funds under management are small compared to the big funds in California and Washington.
“To get to $1 billion in VC investment (in the state or region) we need the California and Seattle VCs to really provide the fuel for local companies,” Rosenfeld said after the third quarter Venture Monitor.
The last time the Portland metro saw activity this low was in 2017. Late 2017 was a turning point of sorts for the region that kicked off several years in which companies were landing huge rounds of more than $100 million.
This new funding environment is perhaps the correction that has been anticipated by investors and others since at least 2018 when valuations and deals were skyrocketing.
“This was being predicted for a long time,” said Jane Ullman, managing director at Silicon Valley Bank, who works with early-stage companies. “We were wrong on the timing and now it’s happening. At the end of the day it’s good for the industry and the economy but it’s a tough period to go through.”
Companies are finding that there is renewed investor focus on business fundamentals and profitability.
“I have seen a lot of these cycles,” said Ullman, who had a previous career as a CFO for startups. “Bubbles grow, they burst, we recalibrate, and we move on. It’s a tough environment for the innovation and entrepreneurial economy, but there are (still) companies doing well and raising funds and exciting opportunities in our community.”
For the fourth quarter the Portland metro saw $83.4 million invested across 25 deals. The fourth quarter of 2022 saw $126.8 million invested across 29 deals in the Portland metro.
For the state of Oregon $460.4 million was invested in 2023 across 144 deals. That’s down from $1.1 billion invested in 2022 across 178 deals statewide.
