The downturn is really hitting seed startups now 📉😳; Coinbase’s Q2 paints a promising picture 🖼️; Microsoft teams up with Aptos Labs to combine blockchain and AI for banks 🤖🏦

FinTech is Eating the World, 11 August

Hey Everyone,

TGIF! What a week… 🤯 And today I have got a cherry on top for you 🍰 as we’re going to look at the downturn that’s really hitting seed startups now (dive into the latest data + startup resources for those who are building or scaling), Coinbase’s second quarter that paints a promising picture (earnings review + why you should be bullish), and Microsoft that teamed up with Aptos Labs to combine blockchain and AI for banks (why it matters + more reads on AI + Finance). Let’s jump straight into the spicy stuff 🌶

The downturn is really hitting seed startups now 📉😳

New data in 📊 Global venture funding experienced a notable decline in July 2023, marking the second-lowest monthly total since the beginning of the slowdown over a year ago. Ouch 😳

This trend suggests a comprehensive reset within the startup ecosystem, impacting startups at various stages and their associated investors. Let’s take a look.

More on this 👉 Key points from the latest Crunchbase data:

• July 2023 Funding Figures:

  • Global venture funding for July 2023 amounted to $18.6 billion, representing a 20% decrease compared to the previous month and a significant 38% drop from the $29.8 billion invested in July 2022.

  • This is close to the lowest monthly total of the year, with monthly funding ranging from $18 billion in February to a peak of $33 billion in January.

• Impact Across All Stages:

  • Funding across all stages, including seed, early, and late, dropped by nearly a third compared to the previous year.

  • Notably, both seed and early-stage funding hit the lowest point in a single month since the downturn began in July 2022, indicating challenges in raising early-stage funding.

• Challenges in Seed Funding:

  • Seed funding, often considered more risky due to the large number of startups involved, is particularly exposed during this period.

  • A significant portion of new players and high risk characterizes the seed funding ecosystem, with the common understanding that a considerable percentage of startups do not succeed.

• Reevaluation of Startup Valuations:

  • The decline in public markets initiated a quarter-long adjustment of valuations in private funding markets.

  • Late-stage funding saw a reduction by the second quarter of 2022, with investors shifting focus to earlier-stage companies.

  • With a slowdown in sales for many startups post-pandemic, both early- and late-stage funding environments experienced tightening.

• Challenges in Follow-On Funding:

  • The prolonged slowdown continued into 2023, raising concerns about the handoff between investors at different stages.

  • Startups are finding it more challenging to secure follow-on funding, potentially leading to a higher closure rate for startups funded during market peaks.

• Sector Funding Breakdown:

  • What’s interesting is that AI companies did not stand out as a leading sector in funding during this period.

  • Funding was distributed across various sectors, with health care and biotech, renewable energy, and financial services receiving notable investments.

✈️ THE TAKEAWAY

What’s next? 🤔 All in all, the venture funding landscape in July 2023 demonstrated a continued decline, impacting startups across stages and sectors. Challenges in securing follow-on funding, as well as adjustments in valuations, have caused a comprehensive reset within the startup ecosystem. Looking ahead, we should expect a temporary timeout for the seed ecosystem for around 18 months or longer. The current surplus of over-valued late-stage private deals needs to be addressed before the ecosystem can regain strength.

ICYMI: EMEA FinTech gets hit the hardest in funding downturn 📉🫣 [+ some valuable resources if you’re building and scaling]