Venture funding falls to its lowest since December 2020

Just a few months ago, it seemed like every monthly VC roundup we wrote began with a reference to record-breaking growth.

Now? The tides of capital have turned in the other direction as a potential recession looms. While global venture investment remained at a healthy $39 billion in May, per Crunchbase, the figure declined for the second month in a row, reaching the lowest point since December 2020.

• In monthly terms, investment declined by nearly 16%. In yearly terms, it fell by 20%.

Funding may be down but, look, $39 billion is still a lot of money, and plenty of companies announced new funding rounds last month. Let’s look at three that stood out to us:

• Group14 Technologies, a lithium-silicon battery startup, raised a $400 million Series C led by Porsche. The company claims it can produce cells that are 50% more energy-dense than traditional lithium-ion batteries, and it opened its first US battery-making facility in April 2021. It plans to use its new funding to build out a second commercial-scale factory in the US.
• Arcadia, which aggregates disparate datasets from electric utilities, raised a $200 million Series E led by JP Morgan. The company’s goal is to “be a clean-energy analog to Plaid,” Canary Media writes, by providing the essential software layer between utilities and consumers or companies looking to build clean-energy products.
• Moma Therapeutics, a biotech startup working on precision cancer treatments, raised a $150 million Series B. The company debuted in 2020 with $86 million in funding and is researching how a group of 400 essential proteins known as “molecular machines” can be regulated in order to treat cancer.

Step back: For weeks, VCs have been warning startups to buckle down as belts tighten. Y Combinator expects the downturn to last for up to 24 months, while Fred Wilson, a long-time VC, wrote that he’d be “planning to ride this thing out for at least eighteen months or more.”

• The trend is hitting late-stage companies the hardest, with funding in May falling nearly 40% from the 2021 monthly average, per Crunchbase.
• On the other hand, seed-stage funding has been more immune—it actually increased 11% from the 2021 monthly average.

But even despite the consecutive months of decline, we’ve already seen $84 billion invested across the first two months of Q2 2022. That’s more than was invested in all of Q2 2019 or Q2 2020. So while we’re coming down from 2021’s Everest-esque peak, we haven’t suddenly teleported all the way down to base camp.