The amount of venture capital dollars provided to St. Louis-based companies in the second quarter of 2023 dropped about 20% compared with the prior quarter, even as a pair of local startups raised significant funding rounds.
While total funding was down, deal count was up in the quarter, according to a report released Thursday by Pitchbook and the National Venture Capital Association. The report tracked 13 startup deals in St. Louis totaling $52.5 million in the second quarter, down from $66.5 million across 12 deals in the previous quarter.
Notable raises for St. Louis startups in the second quarter included a $23 million Series C funding round for supercomputer company SimpleRose and a $16.5 million Series A financing announced by agriculture technology startup Pluton Biosciences.
Through the first half of 2023, St. Louis firms have raised $119 million in venture capital across 25 deals. That’s down from $262 million and 31 deals in the first half of 2022, according to Pitchbook’s data.
The local figures mirror a national drop in funding, with the amount of capital raised by U.S. startups in the second quarter dropping from the previous quarter, well off from record quarterly highs experienced in 2020 and 2021. Investors provided $39.8 billion to U.S. startups in the first quarter, down from $45.8 billion in the first quarter of 2023 and $76.6 billion in the second quarter of 2022. Deal flow also declined, to 3,011, off from 3,503 in the prior quarter and 4,529 a year ago.
“The US venture market operated through Q2 rather mundanely,” the report said. "Deal counts have leveled off, still remaining above pre-2021 figures, and deal value remains low, with few outsized deals to speak of. The tepidness is palpable, and it seems likely the market could quickly hit a cliff if economic conditions worsen. There are now more than 50,000 US-based, VC-backed companies, a figure that has doubled since 2016, and a group that now faces a high capital shortage.”
Though, while the venture capital market has tightened, Thursday’s report said that hasn’t kept investors from funding new companies and providing capital to firms already in their portfolios.
“Two stages saw deal count growth in Q2, though for different reasons. The early stage had the fourth-most-active quarter ever in terms of deal count, and there remains a high number of investors looking to this area of the market,” the report said. “Venture growth also saw a deal count increase, but this increase is more likely rescue funding than simply new growth investments. Many companies at this stage should have exited by now, and with the poor outlook, further dilutive capital has been necessary."
