From SVB And SBF To AI And IPOs, There Was A Lot Of Action (And Acronyms) In 2023

After a rough 2022, many people in venture were hoping 2023 would offer a reprieve.

While the year did see some steadying in the venture-backed startup world, it did not lack for big stories, big busts and big buzz.

From crypto contagion to a banking crisis that rocked the industry, to a CEO鈥檚 firing saga that was like a never-ending soap opera storyline, 2023 saw a lot 鈥� so let鈥檚 take a look back as we go forward.

Crypto contagion

The year started with many folks still trying to wrap their heads around one of the greatest startup implosions of all time: That of crypto exchange . Company founder was already facing criminal charges 鈥� including fraud 鈥� in the collapse of the highly valued company.

FTX and , its U.S.-based exchange, were valued at $32 billion and $8 billion, respectively, and were backed by some of of the biggest names in venture 鈥� including , , , , , , , and .

Despite the crypto contagion that gripped the industry 鈥� with several startups declaring bankruptcy and/or announcing layoffs 鈥� crypto prices steadily rose through the year.

However, VC optimism was not as high and crypto and Web3 funding declined significantly.

Finally in November, a jury convicted Sam Bankman-Fried, commonly known by his initials SBF, on all seven criminal charges he faced, including two counts of fraud and five counts of conspiracy. The jury in Manhattan took just over four hours to decide the disgraced founder stole about $8 billion from customers on his cryptocurrency exchange. In total, the seven charges could bring a 115-year prison term, although legal experts have said Bankman-Fried, who has a sentencing hearing slated for March 2024, is unlikely to receive a sentence that long.

AI = big money

The seeds of this year鈥檚 AI craze were firmly planted in late 2022, when London-based AI-driven visual art startup , San Francisco-based AI video and audio editing tool , and Austin, Texas-based AI content platform all raised big rounds.

However, the even bigger news came in the first month of the new year, as invested a reported $10 billion into AI goliath , the company behind the artificial intelligence tools and .

That, of course, was just the beginning. Dozens of AI startups in the sector 鈥� or at the very least claiming to be using AI 鈥� raised billions of dollars. Some of the biggest deals include:

In June, Palo Alto, California-based locked up a huge $1.3 billion round led by , , , and new investor , which valued Inflection AI at $4 billion, . The startup is building what it says will be the 鈥渓argest AI cluster in the world鈥� and has created large language models to allow people to interact with its AI-powered assistant called Pi, or Personal AI.
In September,聽 San Francisco-based Anthropic inked a deal with for the e-commerce and cloud titan to invest up to $4 billion in the AI startup. The new investment gives Seattle-based Amazon a minority stake in Anthropic. The immediate investment is $1.25 billion, with either party having the right to trigger another $2.75 billion in funding, .
In November, Germany-based raised a $500 million Series B as AI startups outside the U.S. continued to see bigger rounds as the year wore on. The round was led by , and the companies of . Founded in 2019, Aleph Alpha allows companies to develop and deploy large language and multimodal models.

The AI craze among investors included large corporations and their VC arms. Aside from Microsoft, others, including , , , and 1 all found it hard to say no to big rounds in the AI space.

While money poured into AI, so did drama, but that鈥檚 for a little later.

Yet another crisis

Not even AI could stop what would come next, as the industry would suffer a most unexpected blow.

On March 9, the iconic startup bank 鈥� which had relationships with more than half of all venture-backed companies in the U.S. and countless VC firms 鈥� saw its stock price plunge after announcing it would sell $2.25 billion worth of stock to shore up its balance sheet.

Even as the bank sought to assure customers all was well, the announcement rocked the venture world and led to concerns about the bank鈥檚 liquidity and balance sheet strength.

Customers 鈥� including many startups 鈥� sought to get their deposits out of the failing bank, with many needing the money to make upcoming payrolls. The bank鈥檚 collapse forced 鈥檚 workforce management startup to raise $500 million in hours so its clients could pay employees as concerns about access to SVB-held funds swirled.

That soon led to a run on withdrawals and an end of what had become the dominant bank for VC-backed startups for the past 40 years, providing banking services for 鈥渦p-and-coming鈥� tech companies such as and back in the day.

SVB鈥檚 collapse was in part due to the decline venture had witnessed through the past year-plus. During the 2021 venture capital boom, the bank was flush with cash as private companies raised huge sums of fresh capital at sky-high valuations. But the market slowed with rising interest rates, and that cash dried up as deposits by startups dipped. SVB simultaneously made the disastrous decision to invest in long-term, higher-yield bonds, which further hindered its liquidity.

On March 26, the announced had agreed to buy the loans and deposits of the failed Silicon Valley Bank.

Just like that, a vital pillar in the venture capital ecosystem 鈥� known for its vast venture lending practice for startups 鈥� was gone after four decades.

A report by the said the collapse was a 鈥�textbook case of mismanagement by the bank鈥� and that when the bank鈥檚 board and management realized its risks, it did not take the appropriate steps to fix those problems quickly.

Days after regulators issued a report on the historic collapse of Silicon Valley Bank, 鈥� with its expanding technology division and serving as the bank of a growing number of startups 鈥� also fell into receivership and was quickly sold to .

The two banks鈥� collapses 鈥� the second- (First Republic) and third- (SVB) largest in U.S. history 鈥� have changed, and likely will continue to change, the way startups bank, with many now looking to diversify where they put assets and how they are held.

The failures also will continue to affect how companies can secure venture debt 鈥� something more needed now in a slow venture market.

Tech layoffs mounted

The venture slowdown didn鈥檛 just affect banks. As cash became tighter in tech, companies both big and small continued to lay people off.

Since the start of the year, around 190,000 workers at U.S.-based tech companies 鈥� or tech companies with a large U.S. workforce 鈥� have been laid off in mass job cuts, according to聽 SA国际传媒 News鈥� Tech Layoffs Tracker.

Those layoffs have happened everywhere, from big-name public companies including , , , and , to startups such as , , and hundreds of smaller companies.

Those job cuts probably shouldn鈥檛 come as a surprise. VC and growth-equity giants including , and have all substantially slowed their investment pace since the highs of 2021.

Along with companies shedding jobs, we’ve also seen some high-profile startups completely shutter in recent months, including and .

Job cuts and total shutdowns could continue into the new year. Many companies have been able to live off the vast sums they raised in 2021 and 2022, but that money is likely dwindling. In addition, factors such as companies continuing to shift their focus back to profitability and away from growth, and the emergence of AI could mean more layoffs in 2024.

IPO market rebound?

That doesn鈥檛 mean there were not some positive economic signs in the market.

In August, after nearly two years, the tech IPO market finally opened back up.

Leading the way were two highly expected and heavily funded startups, and .

The hope then, as it is now, for investors is that those IPOs 鈥� along with marketing email automation company 鈥檚鈥� could help thaw out the frozen IPO pipeline. It was just two years ago when more than 350 venture-backed companies went public in the U.S.

Exit opportunities are vital to a healthy and robust venture market. VCs need the liquidity from IPOs or M&A events to show LPs returns 鈥� so they have money to invest in funds again and possibly at higher rates.

It鈥檚 still unclear if the flurry of activity will lead to increased IPO activity in 2024, but hopes are high that companies like will see the thawing of the stagnant market as an opportunity to finally give more employees a chance to make their fortune.

Altman drama

Of course, the year could not end without more drama, and this time it was AI darling OpenAI that would provide it.

On Nov. 17, news broke its co-founder and AI wunderkind was out as the company鈥檚 CEO. , the company said Altman鈥檚 departure comes after 鈥渁 deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities. The board no longer has confidence in his ability to continue leading OpenAI.鈥�

The news rocked the tech and venture world and became the only story for days as the saga dragged on.

Over the next few days, news around the shocking removal continued as nearly every employees had signed a letter to the company鈥檚 board saying they would leave the generative AI startup unless the board resigned and brought back Altman and former President .

In the meantime, Altman and Brockman agreed to join a new AI research venture at tech giant 鈥� OpenAI鈥檚 biggest backer.

Finally, the soap opera ended five days later as Altman returned as CEO and the company agreed to revamp its board.

Oddly, very little has come out as to why Altman was fired. Microsoft CEO has said in media interviews that there is no substantial smoking gun behind the firing.

鈥淭he board has not talked about anything that Sam did other than some breakdown in communications,鈥� Nadella said in an .

Expect more on that to come out in the new year, as well as more of the fun, frivolity, drama and disappointment the venture world is known for.