There's more competition than ever for venture capital dollars in a market where investors are reluctant to fund emerging companies.
According to the Q2 2023 Pitchbook-NVCA Venture Monitor Report, U.S. startups secured about $40 billion from venture capital investors in the second quarter, a 48% decline year-over-year. That includes $400 million raised by businesses based in Miami-Dade, Broward and Palm Beach counties.
Deal activity has been flat over the past few quarters after the boom years of 2021 and early 2022, when VC funding reached record levels. High interest rates set by the Federal Reserve is one factor that led to a pullback, as borrowing money has become more expensive.
But there are reasons to be optimistic, Pitchbook reports.
"Throughout history, market crunches have often paved the way for the emergence of industry titans," the report stated. "Moreover, specific sectors such as life sciences and artificial intelligence hold countless opportunities within the present market landscape."
Here are other takeaways from the report:
- Exits are down for venture-backed firms. Only $12 billion in value was generated from 588 exit events (such as acquisitions or IPOs) during the first half of the year. U.S. exit value is on pace to finish at $20 million this year, which would be the lowest in a decade. Pitchbook did not record any exits in South Florida.
- While deal values for early-stage and venture growth firms are down, deal counts increased in Q2. That indicates investors are funding smaller rounds for existing portfolio companies in order to increase a startup's cash runway.
- Nontraditional investors are pulling back. The poor exit environment has made it more difficult for startups to generate returns for investors, Pitchbook reports. as a result, the total number of deals involving nontraditional investors (such as corporations or private equity firms) are down. That's bad news for late-stage companies and may force those enterprises to secure new equity investors.
- Startups led by all female founders still struggle to raise. Companies with all-women founders secured $608 million over 185 deals during the second quarter of the year. In comparison, U.S. startups with mixed female-male founding teams secured $6.1 billion over 504 deals. in Florida, all female founders raised $49 million over eight deals, compared to $96 million over 27 deals for mixed gender teams. So far about 80% of the venture capital raised by U.S. startups this year has gone to all-male founder teams.
For more stories like this one, sign up for Miami Inno newsletters from the South Florida Business Journal and the American Inno network.
