Despite a generative AI funding mania, data shows that other startup funding remains bleak, with valuations down and few IPOs, deals, and late-stage rounds
Newcomer : Twitter: @ediggs , @sandy_carter , and @doener_tech Twitter: Eze Vidra / @ediggs : Global venture funding in Q2 2023 fell 18% quarter over quarter to $65 billion That's down 49% compared to the second quarter of 2022, when startup investors spent $127 billion. Learn more on @crunchbase: https://news.crunchbase.com/ ... [image] @sandy_carter : Generative #AI companies have raised $14.1B in equity funding across 91 deals in 2023 so far (including $10B to OpenAI). Even excluding the OpenAI deal, that's a 38% increase from full-year 2022. Interesting. @unstoppableweb [image] Stephan Dörner / @doener_tech : Global venture funding fell 18% in Q2 quarter over quarter to $65 billion, Crunchbase data shows: https://news.crunchbase.com/ ...
Context & Ripple Effects
The Q2 2023 numbers extend the collapse that began earlier in the year: global VC funding had already fallen 53% year-over-year in Q1 2023, per Crunchbase's first-quarter tally, which also flagged OpenAI's reported $10B round as one of the few bright spots. What is new here is the split the data exposes — generative AI companies pulled $14.1B across 91 deals even as everything else faced down valuations, thin late-stage rounds, and a near-shut IPO window.
First-order effects
- Non-generative-AI founders are raising into a market where global funding halved year-over-year to $65B, forcing down rounds and pushing late-stage capital toward a shrinking set of deals.
- OpenAI alone absorbed $10B of the $14.1B raised by generative AI companies in 2023 so far, meaning a single lab captured most of the sector's headline momentum.
Second-order effects
- Investors triaging portfolios are crowding into the AI lane — PitchBook's US read on the same quarter shows generative AI investment up 65% while overall US funding fell by almost half — leaving other sectors competing for a smaller residual pool.
- The exit drought compounds the squeeze: with few IPOs and acquisitions, later-stage investors have less liquidity to recycle, which shows up downstream in weak quarters like Asia's Q1 2025 drop to its lowest funding since 2014.
Third-order effects
- If the pattern holds, venture splits structurally into two markets — a concentrated generative-AI track that keeps growing its share (by Q2 2024, AI startups took nearly half of all US funding) and a depressed everything-else track with fewer IPOs and late-stage rounds.
- Capital concentration at the frontier-lab level becomes self-reinforcing: mega-rounds to a few labs set the valuation bar and pull limited-partner dollars away from broad-based early-stage funds.
The trend: Venture capital is bifurcating into a generative-AI lane absorbing a rising share of a much smaller global funding pool, with frontier labs like OpenAI capturing outsized single rounds.