Shulou(Shulou.com)11/24 Report--

According to news in the morning of April 6, Beijing time, the amount of venture capital raised by start-ups has fallen sharply by more than 50% in the past 12 months as the economic downturn weighed on the valuations of start-ups.

Globally, venture capital funds invested $76 billion (currently about 522.88 billion yuan) in start-ups in the first three months of 2023, less than half of the $162 billion in the same period last year (about 1.11 trillion yuan), according to data provider Crunchbase.

Although there have been two large fundraising in the technology industry this year, the overall financing figures have fallen sharply. In January, Microsoft invested $10 billion in OpenAI, a generative artificial intelligence company. Last month, Stripe, an American payments giant, raised $6.5 billion.

Without Microsoft's investment in OpenAI, the first quarter of 2023 would have been the worst quarter for the venture capital industry in more than five years.

Gen é Teare, senior data editor at Crunchbase, said the collapse last month of Silicon Valley Bank, a financial institution focused on serving start-ups, further undermined the financing ecology of emerging technology companies and squeezed those that relied on the bank's credit.

Persistently depressed macroeconomic conditions have curbed investor confidence in risky assets, so thousands of capital-hungry start-ups are being forced to face plummeting valuations and agree to debt financing on harsh terms or face bankruptcy.

"We saw the worst business environment before the collapse of Silicon Valley banks," said Sam Yagan, founder of online dating platform OKCupid. He is currently focused on investing in startups.

"most entrepreneurs and venture capitalists have never experienced a downturn," he says. we will tell them that we can't assume that there will be more money waiting for you. There are some good companies that can't get financing right now. "

In the five years to the end of 2021, global venture capital almost quadrupled as VCs helped institutional investors such as pension funds and university endowments allocate assets, as well as the arrival of new entrants such as hedge fund Tiger Global, hoping to get a share of the rising valuations of global technology companies.

Since then, however, the private market valuations of many startups that were once darlings of Silicon Valley investors have been hit hard. Stripe, which was valued at $95 billion in 2021, completed a round of financing last month at a valuation of just $50 billion, a valuation that has fallen by about half.

This trend has also forced some venture capital funds to write down the valuations of invested companies. Earlier this year, Tiger Fund wiped out the valuation of its stake in startups by 1 gamble, or $23 billion, including Stripe and byte jumps.

At the end of the first quarter, venture capital funds held a record $580 billion of ammunition, money raised but not yet invested, according to Crunchbase. The largely frozen IPO (initial public offering) market has also cut off a key source of funding for late-start companies.

This leaves many startups with the choice of raising money at lower valuations, taking on debt or cutting costs until the financing environment improves.

Investors expect a wave of corporate failures later this year as some start-ups run out of cash. "the situation is very difficult," said the founder of a large Silicon Valley venture capital fund. "

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