Startup Funding Was Flat In Q3 — Crowdfunding Continues To Attract Individual Investors

North American startup funding has been all over the place in 2023, but since the first quarter, there's been a steady decline. 

According to recently published Crunchbase data, the third quarter saw "investors put $31.4 billion to work across all stages in U.S. and Canadian startups."

While that's only a 3% decrease from the second quarter, it's a decrease nonetheless. 

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Late Stage

In the third quarter, there was a sequential rise in later-stage investment, largely driven by significant investments in the cleantech and artificial intelligence (AI) sectors.

Investors funneled $16.8 billion into late- and growth-stage ventures in the third quarter. This represents an 8% rise from the previous quarter, but a 15% drop year over year.

One standout investment was a $1.3 billion round for generative AI firm Anthropic from Amazon.com Inc. Battery technology also saw major investments. Redwood Materials Inc., an EV battery recycling startup, secured a $1 billion Series D round led by Capricorn Investment Group and Goldman Sachs. Another battery startup, Ascend Elements, received $460 million. Other notable deals include Databricks Inc. with $500 million and Axiom Space Inc. securing $350 million.

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Early Stage

The third quarter saw a downward trend in early-stage investment.

Investors allocated $11.5 billion to early-stage startups, marking a 16% decline quarter over quarter and 38% year over year. Only 662 early-stage deals were reported, which is a 14% and 31% decline quarter over quarter and year over year, respectively.

Noteworthy investments in this stage were in deep-tech. Denodo, a data integration startup, secured $336 million in a Series B round. Sierra Space Corp., a space-focused startup, raised $290 million in a Series B round, valuing the company at $5.3 billion.

The reduced activity in early-stage investments is concerning for the startup world because these investments often predict future initial public offerings (IPOs) or major acquisitions.

Seed Stage

Seed-stage investments in the third quarter remained relatively stable at $3.1 billion, showing a slight decline of 4% from the previous quarter and 27% from the previous year.

But the number of deals experienced a significant drop, with just over 1,400 reported seed deals — a historical low. These numbers might adjust as seed-stage deals often get updated on the Crunchbase database after a few weeks or months from their closing.

Large seed rounds, especially in biotech, significantly contributed to the third-quarter figures. The top five seed investments brought in over $260 million.

While traditional funding has declined through the first three quarters of 2023, crowdfunding continues to hold steady. 

Through online platforms like StartEngine, retail investors can invest in startups and private companies before they blow up. StartEngine has led the industry in funds raised for two years straight, making the platform itself an intriguing investment.

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