Venture Capital Funding Plummets, But AI Investment Growing Strong

Global funding from venture investors plunged 56% last month compared to April 2022, going from $47.8 billion to about $21 billion this year, according to a Crunchbase analysis released today. However, AI was one of the bright spots for venture capital firms, attracting nearly $3 billion in investments.

“How Low Can It Go?” asks Senior Data Editor Gené Teare in a Crunchbase News headline. This was second-lowest monthly figure on record for Crunchbase, which tracks venture capital investments, following February 2023’s nadir of about $15.6 billion in spending across angel/seed, early, late, and growth-stage rounds.

Month-over-month funding amounts were also down, Crunchbase says. But that’s due large part to a surge in late-stage funding in March 2023, notably Stripe’s $6.5 billion round.

Late-stage funding was hit the hardest last month, according to Crunchbase, with a 62% hit compared to the same period a year ago. That was followed by seed funding, which was down 50%, while early-stage funding dropped about 48%.

The current trend in decreased VC activity can be tracked to July 2022, when global VC funding started trending below $30 billion. The peak in recent VC funding was achieved in November 2021, when about $70 billion was invested globally.

Graphic courtesy Crunchbase

The overall market for investment is gloomy, as economists anticipate the US entering a recession later this year amid persistently high inflation. The stock market returns is also down, with the S&P 500 about 14% off its early 2022 highs. After more than 1,000 IPOs in 2021, there were only 181 in 2022, with just 60 so far this year, according to Stock Analysis.

However, certain industrial segments continue to get the attention of investors. Healthcare attracted the most VC money last month, with $5.7 billion directed there, according to Crunchbase.

And the AI field continues to be active, thanks in large part to interest in the ChatGPT offering launched by OpenAI in late November 2022. OpenAI itself raised another $300 million last month, bringing its total funding to $11.3 billion. All told, AI accounted for $2.8 billion in VC investment in April, or about 13% of total funding.

Other companies active in AI, according to Crunchbase, include CoreWeave, a provider of GPUs in the cloud, which raised $221 million; vector database maker Pinecone, which just raised $100 million in a Series B; AlphaSense, a data analytics provider for retailers that also raised $100 million; and Replit, a developer of a browser-based IDE for Python and other languages, which raised $97 million.

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