Startups that failed this year raised over $27 billion in venture funding, a figure close to the amount raised by startups in the third quarter of 2023. However, this cash burn figure does not include losses from public companies or acquisitions. The decline in VC funding compared to last year has contributed to the challenges faced by startups, leading some to describe it as a "mass extinction event" for the industry.
Venture capital investment into Europe's tech industry is expected to decline by 45% in 2023, dropping to $45 billion from $82 billion in 2022, according to a report by venture capital firm Atomico. However, the artificial intelligence sector has seen continued mega funding rounds, with AI companies attracting significant investment. Europe has shown resilience compared to the US and China, with investment levels growing by 19% since 2020. Climate tech and AI were standout sectors, with funding in the carbon and energy space accounting for 27% of all capital invested in European tech. The IPO market in Europe remains closed, but there is a healthy pipeline of companies looking to tap the public markets.
Crypto funding in August appeared to improve with $819 million invested across 91 companies, a 51% increase from July. However, this boost was largely due to two large funding rounds, and when compared to the same time last year, funding has declined by 53%. Venture capital investors have been less enthusiastic about the digital asset industry since Q1 2022, and funding in the space has dropped for five consecutive quarters. Despite the positive numbers in August, web3 startups would need to raise an additional $960 million in September to surpass second-quarter funding levels, which seems unlikely based on recent trends.
