Shifting investor priorities, more expensive cash and a dearth of the large deals that were so common during the last startup boom could leave many late-stage web3 companies short on cash. And the clock is ticking.
People are already memeing that venture capitalists have pivoted from crypto to AI, hunting, as they’re wont to, for the next big thing. For startups stuck in a now passé category, watching venture dollars flow elsewhere cannot feel great, even if such evolutions in capital flows are normal.
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TechCrunch recently dug into venture capital data to understand how investor interest in web3 companies is faring in 2023. We also sought to glean what we could from similar searches for AI-related startup fundraising.
What did we learn? Well, the data indicates that web3 companies’ ability to raise private capital has flatlined to a fraction of its former pace (perhaps by as much as 80% in Q1 2023 if trends hold). The picture for AI-related funding is a bit less clear.
What is limpid as glacial melt is that there are a good number of late-stage startups — in web3 space and others — stuck between their last funding event, the price set during the transaction, and a new market reality in which investors don’t seem too interested in funding their efforts further.
We’ve touched on the matter before and even recently wondered how far off the unicorn death cliff is. Happily, we can bring our question concerning the terminal cash date for formerly richly-valued startups and the changing genre focus of the venture market together this morning.
Recently, tech investor and founder Elad Gil penned an interesting piece on cash balances at companies that raised money during the final go-go quarters of the 2021-era venture zenith: