SA国际传媒

North American startup investment fell sharply in the fourth quarter, closing out 2022 with funding far below the prior year鈥檚 record-setting levels.

In total, investors put $36.1 billion to work across all stages in Q4, per SA国际传媒 data. That鈥檚 a whopping 63% decline from a year ago (a remarkably bubbly time for startup funding) and a 10% drop from third-quarter 2022.

Declines were sharpest at the late stage, as the shuttered IPO market and shrinking tech valuations muted investor appetite for large follow-on rounds. However, funding was down both year over year and quarter over quarter at every stage.聽

For perspective, we lay out funding by stage over the past 12 quarters below:

Even with dealmaking down, there were some sizable rounds and exits that did get done in Q4. For the full year, meanwhile, 鈥檚 record-setting $20 billion acquisition proved high valuations can persist. Overall, however, both funding and exit numbers point to a down market.

For more detail, below we break things out by stage, as well as highlight top M&A deals and public market debuts.

Late stage

We鈥檒l start at late stage, which remains the largest area for funding, albeit by a smaller lead than in past quarters.

For Q4, late-stage and technology growth investment totaled $18.7 billion. That鈥檚 a decline of聽 67% from the same period a year earlier and a drop of 3% from Q3. It鈥檚 also the lowest total of the past five quarters, as illustrated by the chart below:

Round counts also declined in Q4, with 272 disclosed late-stage and tech growth deals, the lowest total in at least five quarters.

Still, big investments did get done. One standout was , the defense industry technology developer, which landed $1.5 billion in a December Series E round. Other large deals included a $450 million Series E for , a developer of iron-air batteries, and a $330 million Series E for , a provider of mobile and virtual health care.

The Q4 totals top off what has been a downward-trending year. For all of 2022, investment in late-stage and tech growth rounds totalled $124.6 billion. That鈥檚 a 43% decline from 2021, when $217.8 billion went into such deals.

Early stage

Early stage is also down.聽

For the fourth quarter, $14.4 billion went into early-stage rounds (Series A and B), a 59% decline from year-earlier levels and a 16% drop from Q3 tallies. It was also the lowest total of the past five quarters, as illustrated by the chart below:

Deal counts contracted as well, hitting the lowest quarterly level in more than two years, per SA国际传媒 data.聽

Even so, we did see a number of large early-stage deals. , a precision medicine startup, pulled in $261 million in an October Series A round. Other big Q4 round recipients were biopharma startup , with $168 million in Series A funding, and decentralized finance upstart , with $165 million in Series B financing.

Early-stage financing was also down for the full year, with $84 billion in total investment in 2022, down from $117.9 billion in 2021.

Seed stage

North American investors also pulled back at the seed stage.聽

For Q4, seed, pre-seed and angel investment totalled $3 billion. That鈥檚 down 37% year over year and a drop of 18% from the prior quarter.

Below, we look at how the just-ended quarter stacks up relative to the past five:

In some ways, the recent seed-stage decline is harder to explain than the drops we鈥檙e seeing at late stage. At this most nascent stage of startup development, investors aren鈥檛 really concerned about the current state of the IPO and M&A markets, as a potential exit is years away.聽

Nonetheless, seed investors do care about whether there鈥檚 a steady supply of Series A capital to fund the next phase of growth. So, from this perspective, the decline in early-stage investment could be a catalyst for lower seed funding.

Notably, quarterly seed funding totals actually hit their all-time peak in Q1 of 2022, boosted by some big Web3-related rounds. That pushed total seed funding for 2022 to $17 billion, which is actually up about 4% from 2021.

M&A

Acquisition activity slowed in Q4, with no purchases that came close in size to Adobe鈥檚 jaw-dropping Figma deal the prior quarter.

The largest announced deal involving a private, venture-backed company was 鈥檚 $1.46 billion acquisition of , a cloud-based platform for managing the lifecycle of assets and equipment. At the time of purchase, however, ServiceMax was 15 years old and majority-owned by private equity firm .

Several younger startups sold for smaller sums, including , a car repair and maintenance platform being acquired by for $190 million, and , a hardware and software system for data centers, which sold to , also for $190 million.

For more deals, we put together a list of the top seven venture-backed M&A transactions below:

Public offerings

The new offerings market was quiet in Q4, but a few funded companies still made it to market.

One standout was , a car-sharing marketplace that went public via SPAC in December, wrapping up a merger deal that set an initial valuation for the company of $1.2 billion. Shares have fallen steeply since.

Meanwhile, , a startup focused on gene editing, made its debut in October, with shares actually up a bit from the initial price. Several other biotechs also went public, though offerings were on the smaller side. We aggregated a list of seven Q4 offerings, across all sectors, below:

Down is a relative term

While funding was down year over year in 2022, it was still a strong year by historical standards.

Per SA国际传媒 data, last year actually had the second-highest total funding in the past 10 years. It鈥檚 only in comparison to the rollicking 2021 investment climate that things are looking sharply down.

For perspective, below we chart venture dollar volumes by stage since 2013:

Of course, it鈥檚 worth keeping in mind that 2022 started on a stronger note than it finished, with Q4 showing the lowest funding by a wide margin. So, if the pattern continues, it appears likely that we鈥檝e still got further down to go.

Methodology

The data contained in this report comes directly from SA国际传媒, and is based on reported data. Data reported is as of Jan. 4, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding values are given in U.S. dollars unless otherwise noted. SA国际传媒 converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to SA国际传媒 long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. SA国际传媒 also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early stage consists of Series A and Series B rounds, as well as other round types. SA国际传媒 includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late stage consists of Series C, Series D, Series E and later-lettered venture rounds following the 鈥淪eries [Letter]鈥� naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a 鈥渧enture鈥� round. (So basically, any round from the previously defined stages.)

Illustration: Dom Guzman