Start-Up Funding Falls the Most It Has Since 2019

Start-up funding has been going down for the last three years.

The numbers are not easy to read. According to figures released on Thursday by PitchBook, which tracks young companies, investments in U.S. tech start-ups plummeted over the last three months. In the first six months of the year, start-up sales and initial public offerings plummeted 88 percent.

More than a decade of outsize growth was fueled by a booming economy, low interest rates and people using more and more technology, which is why the decline is rare. That surge led to the creation of household names such asAirbnb andInstacart. Funding to high growth start-ups has fallen seven times over the past decade.

Young tech companies have been hit hard by rising interest rates, inflation and uncertainty stemming from the war in Ukraine. Tech companies rely on start-ups in Silicon Valley and beyond to provide the next big innovation and growth engine.

"We've been in a long bull market, and there was a reaction to that frenzied period of dealmaking, as well as macroeconomic uncertainty." We are trying to cut out some of the noise and calm things down.

There is a lot of money behind the start-up industry. The number of deals funded by investors is up 4% from a year ago. Large new funds that can be used into young companies are still being raised by venture capital firms.

The start-ups are used to the boy crying wolf. Tech was predicted to be in a bubble over the last decade due to various blips in the market. Tech bounced back stronger and stronger.

The warnings that all is not well have recently become more prominent.

Young firms have been warned to cut costs, conserve cash and prepare for hard times by venture capitalist. Many start-ups have laid off workers. The payments start-up Fast and the home design company Modsy are two of the companies that have shut down.

Young companies went public in the last two years. Between 86 percent and 95 percent below their highs from the last year, shares of onetime start-up darlings like the stock app Robinhood, the scooter start-up Bird Global, and the coin exchange Coinbase have plummeted. Enjoy Technology was a retail start-up that went public in October. Electric Last Mile Solutions said last month that it would liquidate its assets.

The huge checks and soaring valuations of 2020 were not happening this year, according to an analyst with PitchBook. He said that those were not sustainable.

Mark Goldberg said that the start-up market has reached a kind of stalemate which has led to a lack of action in new funding. He said that many start-up founders don't want to raise money at a price that values their company lower than it was once worth, while investors don't want to pay the high prices of last year. There is no change in the result.

Mr. Goldberg said that it was very cold.

He said that a lot of start-ups collected huge piles of cash during the recent boom times. Some companies will run low on cash next year. He said that the logjam will break eventually.

David Spreng, an investor at Runway Growth Capital, said he had seen a lack of trust between investors and start-up executives.

He said that a lot of the V.C. is sounding alarm bells. He said that the management teams seemed to think that they would be fine.

He said that he has never seen a company freeze its hiring. He said that it was time to get a little worried when companies missed their revenue goals.

The large amount of capital that venture capital firms have accumulated to back new start-ups has given many in the industry confidence that it will not collapse.

When the spigot is turned back on, V.C. will be set up to put capital back to work. If the economy doesn't get worse.