The bloom is off tech investing despite the magic of AI.
Global funding in the fiscal second quarter plunged 49% to $64 billion from $127 billion invested in the same quarter a year earlier, according to a new report by market researcher Crunchbase released Wednesday.
Similarly, funding in the first half of 2023 dropped more than half to $144 billion from $293 billion in the first six months of 2022 despite recent billion-dollar funding rounds to machine-learning startup Inflection AI and fast-fashion retailer Shein.
This marks four straight quarters of funding decline. Since the third quarter of 2022, funding worldwide has slumped at least 45% each quarter year over year. “The downturn will persist; I don’t see it changing,” Gené Teare, Crunchbase’s senior data editor, said in an interview.
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Skittish investors remain cautious by slow sales cycles and the real fear that startups could shutter this year as they struggle to land more funding, Teare said.
If there was one glimmer of hope, it was in AI-related investments, which totaled $25 billion in the first half of 2023, including Microsoft Corp.’s
MSFT,
$10 billion injection into OpenAI.
AI funding accounted for 18% of global funding in the first half of 2023, compared with $29 billion in the same period a year earlier but higher as a proportion of total funding.
“We are going to grow accustomed to $60 billion quarters,” Teare said. “We should see more big AI investments, but a lot of cash-strapped startups will go away after cutting costs. That, in turn, could lead to another wave of startups.”
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