2023 Year in Review

In our 2022 Year in Review, we highlighted the S&P 500 finishing its worst year since 2008, while Venture Capital spending reached its second largest total all time.

In 2023, the public markets rebounded with the S&P 500 up 26.29%, marking its fifth best year of the 21st century. Meanwhile, VC spending declined 38% year over year, marking its lowest total since 2018. This breaks the 2 year run of more than $200B invested by US VCs in 2021 & 2022, with 2023 coming in at a “mere” $138B.

Displayed quarter-over-quarter, you can see 2023 was similar to the latter half of 2022. While the numbers are down from all time highs, we are unlikely to return to pre-2018 numbers given the massive hoard of dry powder VCs are sitting on. That being said, there is less new money joining the mix as both the number of new funds and average size of new funds are down significantly from 2021 & 2022, according to Pitchbook.

In short: we’ve likely found a local bottom in VC spending, especially with optimistic sentiment surrounding the public markets going in to 2024.

Why this matters: We still have a backlog of startups without material funding events since the 2021 bull market. 2023 saw the fewest total exits since 2013, meaning for now companies, don’t have a reliable path to liquidity. If the IPO & M&A markets remain limited in 2024, companies will be forced to seek funding in this new environment and inevitably, many companies will fail to raise. Those who are able to whether the storm through fundraising or prioritization of their bottom line will hopefully emerge from this IPO winter to lead a new class of public-ready companies.

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