PitchBook: US VCs invested $39.8B in Q2 2023, down ~50% YoY, across 3,011 startup deals, down ~33% YoY, with the number of angel or seed deals falling ~50% YoY
Venture capitalists are funding fewer startups, especially at the earliest stages of a company's life, according to new data from research firm PitchBook.
Context & Ripple Effects
This Q2 2023 print lands midway through a contraction that started earlier: PitchBook had already flagged the biggest drop in US Series A and B funding since 2010 in Q2 2022, and CB Insights tracked a 23% quarter-over-quarter fall in global VC activity that same period. What is new here is where the cuts are deepest — angel and seed deal counts fell ~50% YoY, meaning the earliest stage is now contracting as fast as total dollars.
The report also reads as a leading indicator for what followed: PitchBook's own full-year tally showed US VC investment at its lowest level since 2019 for 2023, and quarterly deal counts stayed depressed into 2024.
First-order effects
- Seed-stage founders are the most immediately affected — with angel and seed deals halved year over year, first checks are scarcer even faster than overall funding, pushing more startups toward revenue-based survival rather than institutional rounds.
- VCs managing existing portfolios shift further from new commitments to reserve capital for follow-ons, which is visible in the math: dollars fell ~50% while deal count fell only ~33%, implying bigger average checks concentrated in fewer companies.
Second-order effects
- A halved seed cohort in Q2 2023 thins the Series A pipeline one to two years out, consistent with the depressed deal counts PitchBook reported in Q1 2024 and again in Q3 2024 despite large AI rounds.
- With fewer early-stage entrants, competition among established funds concentrates on proven teams and hot sectors like AI, raising valuations at the top of the market while the broad seed market clears at lower prices.
Third-order effects
- If the pattern holds, US venture consolidates structurally around fewer, larger checks into fewer companies — a barbell of mega-rounds and a shrunken seed tier — rather than the broad-based, high-deal-count model of the late-cycle years.
- The exit bottleneck cited in later PitchBook data becomes self-reinforcing: without liquidity events, limited partners stay cautious, keeping new fund formation and seed deployment below prior-cycle norms until exits reopen.
The trend: Venture is in a multi-year reset that began in mid-2022, with each successive PitchBook print showing the earliest funding stages contracting fastest and recovering last.