By Nicole Goodkind | CNN
New York — Startups are not having a good 2023. And the investors who handed out billions of dollars to fund them aren’t very happy about it.
During more flush years, venture capitalists, angel investors and billionaire evangelists poured their cash into tech startups – the easy money pipe was seemingly open to any Tom, Dick or Harry who had an idea and was willing to attach a buzzy phrase like ‘blockchain’ or ‘AI’ to it. Valuations soared and unicorn companies, those startups said to be worth $1 billion or more, proliferated.
But now, with high interest rates, an uncertain economic environment and a banking crisis that hit Silicon Valley-adjacent banks hard, there’s been a shortage of funds for early-stage companies and a lack of opportunity for late-stage companies to cash out.
For investors looking to maximize their money, better opportunities exist elsewhere.
In this environment, money sitting in less risky money markets tends to pay better than high-risk startups. The Bloomberg US Aggregate bond index, a widely-tracked benchmark for the performance of US investment-grade bonds, logged a 4.5% return in November. That’s the index’s best monthly performance since 1985.
The risks are high with a startup. Sure, tech titans like Apple, Amazon, Alphabet and Microsoft are doing just fine – but their younger siblings are struggling to stay afloat.
So, why would a potential investor stick their neck out for a tech startup when they can get paid to sit on cash instead?
Venture capital funding for startups across the globe has fallen by more than half since last year, according to new Pitchbook data – the annual fundraising figure for 2023 is pacing towards its lowest level since 2015.
With a lack of both funds and exit opportunities (that’s when shareholders are able to cash out by selling a bunch of stock through an acquisition, IPO, buyout or merger), early stage companies are unable to get started and…
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