Title: “Global VC Investment Faces Downturn in 2023, AI Emerges as a Bright Spot”
In 2023, global venture capital (VC) investment experienced a significant decline, falling to $344 billion across 37,808 deals from the previous year’s $531.4 billion across 51,894 deals. The drop was attributed to geopolitical challenges, macro-economic factors, high interest rates, inflation, a challenging exit environment, and ongoing concerns regarding startup valuations.
According to KPMG Private Enterprise’s ‘Venture Pulse’ report, the Americas led in VC investment with $183.6 billion, followed by the Asia-Pacific region with $92.4 billion, and Europe with $62.3 billion. The fourth quarter of 2023 saw a particularly soft market, recording the lowest global investment since Q3 2016 at $74.9 billion across 7,572 deals.
The Asia-Pacific region also experienced a significant decline, reaching $18.8 billion in Q4—the lowest level since Q1 2017. Despite a strong Indian economy, VC investments in the country were muted in recent quarters, attributed to the post-COVID-19 scenario where excess money supply dwindled. However, experts anticipate a rebound in VC investments with expected easing of interest rates.
Amid the downturn, artificial intelligence (AI) stood out as a beacon of activity. AI-focused startups secured three of the $1 billion funding rounds in Q4. Despite overall exits faltering, the report highlights that AI will likely remain an attractive area for VC investment in the coming year. In the US, AI-focused companies accounted for six of the 10 largest VC deals of the quarter, while Europe also saw three significant AI deals. The report suggests that AI will continue to attract investment, while M&A activity may pick up as opportunistic buyers seek bargains.
