Last month showed a continued and noticeable decrease in global venture funding, a new report from Crunchbase found.
In a year-over-year comparison, global funding reached $21 billion in April, down 56% from $47.8 billion the same month a year ago as venture investors continue to pull back, according to the report.
Healthcare, artificial intelligence and financial services led in raking in the cash last month, while unicorn funding dropped to the single digits from 40 at the same time last year.
Healthcare stood apart from all other sectors in raising $5.7 billion in April. Standout companies include RNA-based medicine provider Orbital Therapeutics, medical robotics company Noah Medical and drugs from plants developer Enveda Biosciences.
Despite market slowdowns, AI also demonstrated the ability to launch larger funding rounds, raising a total of $2.8 billion in April.
Overall, April 2023 showed the second lowest funding month since July 2022 when venture capital began to scale below $30 billion.
"In the current market, funding will most likely stay slow in the third and fourth quarters," Crunchbase News Senior Data Editor Gené Teare told Fierce Healthcare. "I think we will see more companies getting ready to raise funding in 2024 as companies typically have a two-year runway before they need to raise again. Investors have funds to invest but will continue to be more selective."
AI did relatively well for itself, making up 13% of VC funding in the past month. OpenAI brought in $300 million, CoreWeave scored $221 million and AlphaSense claimed $100 million.
Global VC funding dropped dramatically during a rocky first quarter, Crunchbase data shows. VC funding reached $76 billion—marking a 53% decline year over year from $162 billion in the first quarter of 2022. That’s even including a reported $10 billion investment into OpenAI—largely from Microsoft—and a $6.5 billion round for payments giant Stripe. Without those two large deals, Q1 venture funding would have been down even more dramatically, close to $60 billion, according to the company's Q1 report.
The report revealed that the recent market slowdown has impacted all funding stages. Seed funding was down more than 50% from the same time last year, and early-stage funding dropped 48%. Late-stage funding saw the greatest fall at 62%.
"The late-stage funding markets were hot in 2021 as private equity and hedge funds invested in highly valued private companies with plans to go public," Teare said. "As the public markets dried up in 2022, those investors stepped away."
Deal sizes have faltered from seed through Series C funding rounds. Crunchbase found that month-over-month funding amounts were down largely due to an increase in late-stage funding in March and Stripe’s $6.5 billion haul.
Global funding for unicorn companies is down significantly after reaching a $30 billion peak in June 2021. Of the $21 billion raised over the last month, $4.4 billion was invested in unicorns. This number reveals a departure from previous months this year where unicorns comprised one-third of all funding.
"The steep drop in unicorn funding is not surprising in this slower funding climate," Teare said. "Many unicorn companies are overvalued in this market and are therefore likely to avoid raising funding if they can."
Despite bleak skies, medical supply company Zipline stood out for the $330 million series F funding raise elevating it to a $4.8 billion evaluation, a 55% increase from $2.8 billion in 2021. An April 10 filing in Delaware included a Series F-1 extension of up to $20 million that could still be rolled into the round, according to Forbes.
Following the round, the drone company’s shares reached $40.20. The filing did not name a lead investor but previous funders have included Sequoia, Andreessen Horowitz, Katalyst Ventures, GV, Pactolus Ventures, Emerging Capital Partners and Reinvent Capital. The fresh cash follows the release of Zipline’s new autonomous drone, Platform 2.
“In the U.S., we're already working with some of the most innovative health systems, retailers and restaurants,” said Deepak Ahuja, Zipline chief business and financial officer, during a press conference. “During the pandemic, we saw a dramatic increase in telehealth. The digital solutions to support decentralized care have come a long way. But the physical systems are still lagging.”
The Federal Reserve raised interest rates today above 5% for the first time since 2007 amid recent bank failures including First Republic Bank and Silicon Valley Bank. Policymakers have suggested that further increases are not needed.
Despite the quarter point bump being the 10th straight increase, inflation continues to plague the markets. Today’s move by central bankers marks the fastest sequence of rate increases since the 1980s.
"The increase in interest rates negatively impacted the value of public stocks, especially technology companies," Teare said. "With rates at the highest level in 16 years, the slowdown in the public markets will continue to curtail investment in private companies."
The report was built from data collected directly through Crunchbase as of May 2, 2023. The study authors note that data lags are most pronounced at the earliest stages of venture activity.