More evidence continues to show just how challenging today's venture-funding environment is compared to the pandemic-era boom.
Nationally, tech firms raised a collective $37 billion across 2,856 deals last quarter. It was the lowest quarterly deal amount since the fourth quarter of 2017, according to a report from venture capital data firm PitchBook Data. The deal count was a 20% decline from the previous quarter and a 45% decline from a year ago.
The number of startups landing VC funding declined in nearly all of America's top and emerging tech hubs, including in the Minneapolis/St. Paul metro area, as funding becomes harder to come by in 2023. The funding slowdown comes amid a broader tech industry downturn that's resulted in layoffs across the sector and the failure of startup-friendly bank Silicon Valley Bank.
Silicon Valley saw 519 VC deals last quarter, down 18% from the quarter before and 55% from the same quarter in 2022, according to a report from venture-capital data firm PitchBook Data.
Despite its historic dominance in the tech sector, the Bay Area's share of overall U.S. deal count has fallen below 20% for three consecutive quarters — the lowest PitchBook's data has ever recorded. After tallying roughly 25% of all VC deals in 2014, the Bay Area's share of deals was just 18% last quarter.
It's another sign other metros are indeed nipping at Silicon Valley's heels. But venture deals are also declining in those emerging markets, in some cases drastically. In Austin, 63 startups raised capital last quarter, down 38% from the previous quarter and 60% from a year ago. In Miami, startups saw 70 deals last quarter, a 51% decrease from the same quarter last year. Seattle startups scored 69 deals, down 56% from a year ago.
The non-Silicon Valley tech powerhouses also saw deal counts plummet last quarter. New York startups saw 16% fewer deals than the previous quarter and 46% behind its 2022 Q1 pace. Boston's startup scene netted 49% fewer deals than last year. L.A. saw startup fundraises drop 53% year-over-year.
Locally, Minneapolis-area startups saw deal count reach 40 deals, down 9% from last quarter and a decline of 27% from the first quarter of 2022. Companies in the region had received $130.5 million the first quarter of 2023, compared to $899 million over the same period a year prior, the data show.
Denver was one of the few metros to see an uptick in deals from the fourth quarter of 2022, notching 55 deals last quarter, a 17% increase. Still, Denver posted a year-over-year decline from 80 in the first quarter of 2022. Deal volume in Durham, North Carolina, increased from the previous quarter and from the same quarter last year, landing 23 startup fundings compared to 17 in both the prior quarter and also a year ago.
As deal counts turn downward, the overall pace of funding remains in line with what the sector saw pre-pandemic. Time will tell if startup funding is truly losing steam, or if 2021 was just that much of an historic outlier for venture capital.
One Minneapolis-based startup, Gravie, so far appears to be bucking that slowdown. Last month, the health benefits company announced that it would soon receive a $179 million equity investment from New York-based private equity firm General Atlantic and existing investors. Another deal includes Anteris Technologies, an Eagan-based company developing a device to replace a heart’s aortic valve, which raised about $24 million.
The drop in venture funding deals comes amid a drastic slowdown in startup exits. Only $5.8 billion was generated from initial public offerings, mergers and acquisitions last quarter, according to PitchBook. That accounts for less than 1% of the total exit value seen in 2021.
Part of the decline in VC deals can be attributed to seed and angel investing, where deal activity fell to a two-and-a-half-year low last quarter. Seed and angel deals typically account for around 47% of all deals in a given quarter, PitchBook said.
Last quarter, those investments represented just 34% of all VC activity. Angel and seed investments currently make up their smallest share of venture investment in at least a decade, according to PitchBook's report.
The continued decline in angel and seed funding is notable as that stage of startup investing is typically the least impacted by challenges faced by tech firms at the pubic markets. But it seems even those deals are feeling the effects of the national tech downturn.
