Venture capital investors attempted to settle into a new normal in 2023, following the shifting tides in 2022 and the deflation of the pandemic-fueled bubble. Yet uncertainty persisted throughout the year, making the adjustment for investors choppy. This uncertainty that hung over the industry stemmed from many realities beyond and adjacent to the venture industry. The ongoing war in Ukraine, a new military conflict in Israel, and the strains between China and Taiwan kept geopolitical tensions high. A looming recession (that never came to be), rising interest rates that reached 15-year highs, and sustained inflation over 6% somehow resulted in a soft landing for the U.S. economy. A major banking disruption from the failure of Silicon Valley Bank resulted in new best practices for the venture industry instead of a broader banking contagion. The IPO window peeked open but closed quickly, disappointing investors and the long line of IPO-ready companies. The public markets rallied at times and ended the year with meaningful gains thanks to tech titans like Meta, Amazon, Apple, Microsoft, and Google, but the markets were quite volatile in the interim periods.

Amidst this choppiness, venture capital deal-making, fundraising, and exit activity were all down. Venture investors struggled with how to underwrite and value private companies. Investors raised the bar for new investments and kept their purse strings tight. We saw a flight to quality across the ecosystem, where only the best founders, ideas, companies, and funds raised capital.

Amidst a broad decline in funding for venture-backed companies, the fintech sector took it the hardest and fell further out of favor, with banking in particular seeing an annual funding drop of 72% in 2023. Founders faced with slowing demand set lower growth targets for 2023. And the private markets suffered high profile and widespread write-downs, as well as some epic failures and shutdowns.