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The State of U.S. Early-Stage Venture & Startups: 2Q23

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The State of U.S. Early-Stage Venture & Startups: 2Q23

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Foreward from

Jason Mok

We recently partnered with AngelList to create The State of U.S. Early-Stage Venture & Startups: 2Q23 Report. Taken together, our combined datasets offer exclusive and timely insight into how capital flowed into and out of startups during the quarter - and how that compares to prior quarters.

While we continue to navigate challenging times with dealmaking, valuations, and fundraising activity being down, I can’t help but feel a sense of excitement and cautious optimism about what’s to come. We wrote in our 2022 Brex Startup Review that we believed that startups were resilient, and we stand by it. We see pockets of opportunity with the advancement of AI and the continued growth of startup hubs, each with their own unique culture, around the country. We’re also proud of the financial discipline we see founders practicing as they focus on the real revenue drivers of their business and look to extend runway.

We partnered with AngelList on this report not to alarm founders by painting a somewhat gloomy picture, but rather in the hopes that our aggregate data and insights can help inform and up-level the key decisions they make every day on the path to sustainable, long-term growth. We are committed to serving the startup ecosystem in good times and challenging times, because founders can and should be able to dream big in any market.

Summary of findings

  • Based on AngelList data, 2Q23 was the worst quarter ever for startup dealmaking, as activity rate dropped to a historical low and positive activity rate dropped to a near-historical low.

  • While average valuations data was mixed, median valuation data suggests startups are continuing to lower their valuations, likely to attract investment.

  • AI and ML surged ahead as the most popular investment sector on AngelList in 2Q23, with VCs showing waning interest in other technology sectors.

  • Continued inactivity in the fundraising market has most startups practicing financial discipline to extend runway.

  • When reducing spend, startups appear to be lowering their marketing and advertising spend, as well as spend on recurring softwares, particularly those that enable remote work.

  • Overall spend analysis continues to validate long-term trends, including the rise of AI, the increasing geographic distribution of startups, and the globalization of business.

Early-stage venture appears to be in the midst of a challenging transition, as startups that excelled from a fundraising standpoint during the 2021-22 bull market struggle to adapt to this new macroeconomic environment.

If there’s a silver lining, it’s that the declines in median valuations suggest we may have found a “bottom” of the market, and that early-stage venture may be poised for a rebound in the coming months. It’s worth noting that venture performance was a bit stronger at the end of June than it was at the end of 1Q23.

Like all financial markets, everything in venture is cyclical. We believe that what comes down will go back up at some point. Further, being at the market bottom may also present opportunities. For founders, it’s a chance to get smarter about spend and identify the real revenue drivers of your business. For investors, it’s the opportunity to invest while prices are low, and potentially ride the wave of a market bounce back.

For more details on the findings, you can read the full report here or watch the webinar discussion here.

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