Venture Capital Benchmark Q3 2023



2023 on pace to mirror 2019 VC in global funding

The VC community has many catchy terms to define the past two years relative to 2021: a regression to the mean, a return back down to earth, VC winter, and so on. In general, there is consensus that this “reality check” was a necessary market correction. But it’s not without pain, as many founders face long investment cycles, an increasingly high bar for funding, and slower sales cycles. Bridge rounds, restructuring, many smaller M&A activity, and going into cockroach mode while founders aim to hit meaningful milestones are true signs of the times.

With YTD numbers, we try to extrapolate how this year might end. Total funding is on track to have come down from 2022, but is on par with 2019 – indeed, returning to the mean. In the Q3 2023 VC Benchmark, we dig into the nuances around Seed to Series B+ across the US, Europe and Latin American markets, with voices from the trenches – founders and investors. In terms of quarter-over-quarter results, we’re happy to see an uptick in funding going to Series B+ companies, and a warming of the IPO market.

Welcome to the Q3 VC Benchmark.

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Q3 Key Takeaways from TheVentureCity

We’ll dive more into each one of these throughout the report, but here’s a snapshot:
Funding: Q3 venture funding was up ~9% QoQ, at $59B in US, Latam, and Europe
Deals: Round sizes increased at every stage QoQ, but deal count decreased
Markets: IPOs are back, with a 24% increase QoQ; sets positive signal for exits
AI: Investors keep pouring gas on the fire, but high costs are becoming evident
Clean Tech: More than half the top 10 global mega rounds, representing 16% of all capital invested, were devoted to the EV industry and clean energy innovations
Focus on Performance: Early-stage to public companies, inventors want to see viable business models supported by data
Trends to watch

The biggest headlines

 For the founders and investors that have witnessed multiple market cycles, they know that massive opportunities exist today, especially given the technical advancements available at founders’ fingertips. Many massive, generational companies were founded during recessions or massive market displocations. Chamath Palihapitiya from Social Capital comments on the phenomena in relation to high interest rates, a common contributor to recessionary environments when equity markets recede. Ultimately, he concludes that technology startup success is most likely to occur when companies exploit massive technology innovation during periods of higher than average interest rates. The former part of this tech startup equation may come in the form of leap forwards in alternative intelligence (AI) and reduction in cost of computing power. AI is finally realizing its potential as a horizontal tech enabler to disrupt virtually every industry and make products better.

Founders are rushing to incorporate AI into their value propositions while VCs debate where in the AI value chain they should invest, and which portions are most likely to win. The pace of innovation in the space is frightening for many, especially with the onset of ChatGPT by OpenAI and the rapid advancements of their computing models that huge enterprises are now adopting. This pace is so fast that many well-regarded AI experts are calling for a 6-month pause on experiments in AI beyond GPT-4 so regulation and the public can catch up and prepare for the progress (or regress) that is upon our doorstep. However, innovation is hardly containable, best exemplified with the recent launch of Auto-GPT which can autonomously run AI prompts to achieve an end goal with little to no human intervention. Combine that with the marginal cost of energy and computing going to zero, founders have unbelievable technological resources available to them to build incredible products.

VC perspective


Elizabeth Piñon, Partner here at TheVentureCity and former hyper-growth startup operator, always has her ear to the ground. She is constantly in touch with early and mid stage founders as well as investors from across the spectrum. Here she shares her view from the investor chair to start us off:

Q3 Global VC Funding 

Not great, but not all bad

Venture Capital deal count continued on a downward trend since the beginning of this year, and continued to drop 27% QoQ.

Source: pitchbook

But total capital invested increased 9%, and the average deal size improved from $6.9M to $10.4M, driven primarily by outliers in the Series B+. Comparing Q3 2023 to the same quarter in 2022, total deal count was down 33%, from 8,482 to 5,647, and capital invested down 7%. 

Total Funding – Europe, US , Latam all up

Europe had a 22% increase in overall capital invested QoQ, the third consecutive quarterly increase since Q1. Meanwhile, US funding increased 7%, and Latam increased 2%. Consistent with the norm, the total deal count in the US was almost double that of Europe; 3,505 deals in the US compared to 1,869 in Europe and 197 in Latam.

Seed Stage Deals Drop

Global seed deals done had been steady in H1 2023, at ~1,900, but Q3 decreased sharply to 1,351 deals, a decline of 27%.

Bigger but Fewer Series B+ Deals

Overall funding at the Series B+ improved from $41.1B to $49B QoQ, but deal count fell to 3,012 from 3,760, reflecting bigger rounds to the lucky entrepreneurs with proven market-fit and growth.

Q3 Major Topics

Now, we move on to the major areas that caught our attention in Q3: IPO’s, AI, Climate Tech, and Profitability.

IPO activity

The IPO market awoke from its long slumber in Q3, up 24% from the previous quarter 

Notable IPOs of Q3 (and possibly of this entire year): 

This year, tech stocks have rallied, giving founders and investors confidence to consider filing for a public listing. We are cautiously optimistic that barring any further rate hikes in the short-term, the IPO market will remain open and increase in activity in 2024.

Instacart, the grocery delivery company’s long-awaited IPO took place in September, priced at $30 per share and valuing the company at $10B. The valuation was significantly lower than that of its previous private funding round, which valued the company at $39B. The stock price traded at $33.7 per share on the first day of closing, but has declined since. 

Klaviyo, who offers marketing automation, secured a valuation of $9.2B in its IPO debut with shares priced at $30 per share. The share price reached a peak of $34.50 on September 29 this year, and has remained fairly stable since.

Arm, the AI chip maker, is the biggest IPO news of the year, who listed at $51 a share, valuing the company at over $54B. Arm’s impressive list of customers includes the likes of Apple, Google, Nivida and Samsung, among others.

Why does this matter for early-stage investors and entrepreneurs?
If IPOs in 2021 were valued for hyper-growth, 2023 IPOs have a new roadmap for success: profitability and sustainable growth. And ownership matters. In the case of Klaviyo, CEO Andrew Bialecki maintained a cool 38% ownership, pointing to their stellar capital efficiency. Compare that to the 15% ownership most founders have at IPO (SaaStr).
There are clear winners and losers from the IPOs above. In the case of Instacart, investors at the Series C stage returned a meager 2.5x MOIC over 8 years. Those after, such as Tiger Global, did even worse. T. Rowe Price, is on track to lose 59% of its original $200M investment. The big winners were early backers like Sequoia, and Kohsla Ventures, highlighting the price risk at later stage, and the opportunity for all Seed investors (The Information).
The prospect of liquidity via public markets is promising, as most liquidity leading up to Q3 has come by the way of M&A and secondaries. Other anticipated IPOs of 2023 include Stripe, Chimes, Discord, and Reddit.
Artificial Intelligence: Is the Hype Holding Up?

VCs Poured $17.4B into AI companies in Q3, up from $12.2B in Q2.

First, some background…
Despite the newfound investor focus on Artificial Intelligence (AI), sparked by massive advancements over the past year in Gen AI, we have been investing in startups who differentiate based on their use of AI since we were founded in 2017. And in doing so, we are and have always looked for the same things: an unstoppable founding team with a unique understanding of a real problem, operating in a large and growing market with a path to true defensibility. To name a few, we backed 1doc3 in 2018, who’s using AI to triage health concerns for telemedicine; Outloud.AI in 2020, who provides frontline intelligence for fast food chains; and Bfore.AI in 2021, who leverages AI to predict cyber-crime.

Fittingly, we don’t see this as a passing fad, because we also don’t view AI as a “vertical” or a means to an end. Harnessing Gen AI is a new unspoken expectation for every high-growth startup.
Today, the problem and opportunity ahead at the Gen AI stage is the high cost to run Large Language Models (LLMs). 
Microsoft’s Github serves 1.5 million developers, paying $10 / month, and on average they cost more than $20 per user to run. This represents a $15M+ monthly loss (WSJ). Not surprisingly, startups and incumbents are racing to make these models more efficient.
We had a look at Y Combinator’s Summer 23 cohort, and 80% of the startups are AI-based or AI adjacent. Out of those, most were focused on infrastructure, helping improve Large Language Models’ (LLMs) deployment, efficiency, and/or accuracy. 
The mega rounds in AI were…MEGA. 
Last quarter, Amazon invested $1.3B, with a commitment to invest up to $4B (!) in Anthropic. Google DeepMind had already invested $400M into Anthropic in Q1, so this startup is well-capitalized by two tech giants and going toe to toe with OpenAI/Microsoft. Many on the team behind Anthropic, including the CEO, are ex OpenAI employees, and they want to make AI safer (see: The $1 billion gamble to ensure AI doesn’t destroy humanity).
On the surface, they are already offering the same features as OpenAI; an open-source LLM for developers, and a customer-facing chatbot experience. Their deal with Amazon came with a commitment to train their models on AWS cloud services and in-house chips, which would be a switch from Google Cloud. Some might call this race to become the Anthropic storage solution, between Google and Amazon, a love triangle (CMS Wire).
And then there’s Databricks, who raised $500M at a whopping $43B valuation. This is a 29x revenue multiple deal, and investors believe they’re worth every penny. Sitting at a $1.4B run rate from Q2, this is the same company who acquired MosaicML (another OpenAI competitor) for $1.3B in Q2. Customers use Databricks to “process, store, clean, share, analyze, model, and monetize their datasets with solutions from business intelligence (BI) to machine learning (ML).” They’re poised for hyper-scale, and are uniquely positioned to win given their access to large customer datasets.
Focus on Performance

Profitability: Should it matter?

Companies of all shapes and sizes have been tightening their belts. 
Uber was the pioneer of blitz scaling. But a clear vision for growth at the global scale came with mounting losses (for context, Uber has racked up $31.5B in losses since 2014). That reached a turning point last quarter. In Q3, Uber reported an operating profit of $326M. For comparison, it had posted an operating loss of $713 million only a year ago.
It came as a result of increased demand from ride-hailing and delivery segments, and more discipline. Uber’s profitability news is a significant landmark given the company’s aggressive spending history over the years. Dara Khosrowshahi, CEO of Uber, has attributed this turnaround to “disciplined execution, record audience and strong engagement.” (FT)
The significance of the Uber headline is its reflection of the economic climate. Companies previously rewarded for growth now must prove they can also grow their business profitably. This begins to ring true even at the early-stage, where monetization, payback periods, and breakeven has earned a greater focus than before. And the best-laid fundraising plans sometimes need a wake up call.
Founders that have been challenged to fundraise because their business model is no longer in vogue (see also: not B2B SaaS), or because their metrics are underwhelming, are now digging deep to figure out a new path forward into their next phase of growth. In uncertain times, and especially at Series A+, founders are treating their most recent fundraise as if it could be their last.
They have made cuts, maybe even pivoted on their value proposition. We see this climate as part of a larger passing cycle, and those who prove they can weather the storm and grow without massive budgets, will emerge in a more favorable fundraising environment. Then, they are free to choose when and how they step on the gas.

VC perspective


Our friend Luis Cervantes, Managing Director at General Atlantic, shares his take on growth stage investing:

“Activity at the Series B+ stage is picking up, but it's still slower than historical standards. Most investments focused on later-stage growth are flowing into profitable businesses. Looking into early 2023, let's hope the growth stage continues to accelerate!”

Luis Cervantes

Fundraising by Geography


US edges up just 6% in funding

Q3 capital invested improved slightly, from $37.3B to $39.8B QoQ, while deal count came down 24%.

Source: pitchbook

The overall funding slump that began in 2022 has been driven in part by sustained high interest rates. Today though, the Fed appears to be holding still on future hikes, and there is even talk of when rates will come down. 

VC perspective


Leura Craig, Managing Partner at Outlander VC and former founder, shares her take on Seed-stage fundraising dynamics today.

In this environment, Seed-stage companies are faced with Seed funds, looking for Seed companies, with Series A metrics. Whereas in the previous few years, companies would raise millions of dollars with very early product and traction (if any), we are now seeing that to even get conversations going, the bar is significantly higher. Investors want to see a credible product, significant traction, a massive TAM, a solid team, and are extremely focused on how much companies have spent to achieve these milestones. Capital efficiency is absolutely critical for all early-stage companies at this point. 

One thing that companies should also keep in mind is that this mentality is going to be the prevailing one for a while. So, a bridge round may keep the lights on, but entrepreneurs need to realize that more money in makes the bar that much higher for your next round. The best companies are going to continue to reduce and/or be extremely diligent about burn, and focus on hitting key milestones with as limited resources as possible.

Leura Craig

Volume sinks, but funding surges

Europe saw its lowest deal count for more than a year, with a total of 1,869 deals in Q3 2023, a 33% drop from last quarter.

Source: pitchbook

However, the total capital invested was the highest it has been this year with $18.6B invested. This is Europe’s third straight quarterly increase in deal value. If the trend continues, it could indicate more good news for late-stage startups that have taken a hit this year globally.


Deal count slides, but funding improves

Deal count has been decreasing since Q1, but average deal size saw a 47% improvement from $3.7M in Q2 to $5.5M in Q3 2023. In Q3, 197 deals were done and $1B invested.

Source: pitchbook

A few headliner deals that drove total deal value:

Mexico-based Hospitales MAC and Brazil-based Grupo Elfa, raised $160M and $127M respectively, both in the healthcare space.

Brazilian unicorn Loft closed a $100M equity round in the real estate tech space.

Our friends at Bicycle Capital made their first investment of an inaugural fund in Mottu, a motorcycle rental startup’s $50M Series C.

Capital invested in Q3 was basically flat from Q2, but deal count continued to slide, down 31% QoQ. Looking at the downward trend in deals done since earlier this year, we wonder if we have hit the bottom of VC winter in Latam.

Founder perspective


Raphael Avellar of BrandLovrs, a serial founder based out of Brazil, is building in the Creator Economy space. We backed him at his Seed round led by Canary. Here, he breaks down 1) what it takes to raise a Seed vs Series A, and 2) the regional vs. US investor profile.

"After conversing with over 100 investors this year, the following are my key takeaways:

For a seed round, it's not merely about having a brilliant idea. What's essential is a strong founding team, a clear vision, and adaptability. The MVP should be more than just functional; it needs to stand out, providing tangible metrics that highlight its potential. Crucially, for the majority of products, there's an expectation to already have a robust plan for integrating AI at the core of the business.

As we progress to Series A, the prerequisites intensify. A clear Product-Market Fit (PMF) is non-negotiable. Companies aiming for success at this stage should be clocking in at least $1-1.5 million in net revenues and exhibit considerable growth potential. Sustainable success hinges on having a defensible competitive advantage.

An important observation from my discussions: regional investors appear more cautious than their global counterparts when it comes to allocating capital for Latam ventures. This divergence in sentiment is noteworthy for founders seeking funding in the region.”

Raphael Avellar

Fundraising by Stage


Early stage sees a pullback 

With a decrease in capital invested and deals, this marks the lowest amount of capital invested since the beginning of 2021. 

Source: pitchbook

That said, the average check size increased to $3.4M the last quarter, the highest in comparison to any other quarter this year. 

An increase in average deal size could indicate founders raising Seed plus rounds or extensions, instead of a Series A during a tough fundraising climate.


The trendline is nearly identical to the seed stage

There was a 23% decline in total capital invested from Q2 to Q3 2023 and a drop in deal count by 28%. 

Source: pitchbook

The Series A stage remains a tricky one to decipher due to the varying round sizes and how it is interpreted across different markets. As it has been the trend for all other stages, Series A saw the highest average deal size of the year in Q3 as well, with $19.7M. 

VC perspective


Seth Shuldiner, based in Miami, Partner at SaaS Ventures and co-investor in TheVentureCity portfolio company Legal Karma, sees less air between Pre-Seed, Seed, and Series A valuations:

“2023 has largely been a continuation of venture capital's return back down to earth. We've seen some leveling out of both new deal volume and valuations at the Pre-Seed and Seed stages over the past few quarters. That said, it does feel like funds that had practically stopped investing over the past year are beginning to lead rounds again. 

I see founders raising smaller rounds right out of the gates, less air between each round and a more gradual valuation step-up, and slower deal pacing.

While this is anecdotal, I feel particularly optimistic about 2023-2024 vintage VC funds making initial investments over the next 3 years.”

Seth Shuldiner

Good news for Series B+ 

It’s good news out there for later-stage growth companies

Remember how the later stage suffered in Q2 2023, not just with total capital invested but also with average round sizes? That trend seems to have reversed in the past quarter, where Series B+ investments saw a 19% increase in total funding QoQ, with $49B invested in Q3 2023.

Source: pitchbook

The range in average deal size is wide. In Q2 2023 the average deal was $10.9M, but for Q3 it increased to $16.2M, a sizable 48% jump.  A significant portion of late-stage funding went to industries that are capital-intensive by nature, such as biotech, energy, and life sciences. YTD 2023, the Growth-stage capital in 2023 is flowing to proven businesses with strong market fit, a stark change from the exuberance of 2021.

But this year’s winter, compared to 2022, has the tailwinds of the public markets, giving confidence to fund the soon-to-be unicorns. S&P is up 14% compared to its 19% drop in 2022 (Reuters). And the “magificient 7” tech stocks gained 92%; Apple, Microsoft, Alphabet,, Nvidia, Tesla and Meta (CNBC).

Industry Spotlight: Climate and Clean Tech in Europe

Biggest Q3 Rounds Dominated by EV Infra

Electric vehicle infrastructure and clean energy dominate

Take a look at the 10 biggest deals of last quarter (which represent 16% of all deal value), and you’ll see electric vehicle infrastructure and clean energy are carrying the load. 5 / 10 mega-rounds were focused on the EV industry, and 2 were devoted to clean energy (CB Insights).

And the fury of EV investing comes with good reason, given regulatory tailwinds. By 2030, the US has set a goal for half of all passenger vehicles to be zero-emission or plug-in. The European Union expects 100% of new cars to be zero-emission vehicles by 2035 (NPR). Batteries are the most integral part of an EV, but a close second is the steel with which they are built, which clearly explains the “why” behind the below investments:

Sweden sets the bar for energy innovation:

Swedish-based Northvolt raised a $1.2B, to supercharge the growth of their battery development and manufacturing, specializing in lithium-ion technology for electric vehicles. For them, it’s not just about building batteries for the EV industry. They develop them into solutions that power everything from motorcycles and mining machines, to energy storage systems and ferries.

Swedish-based H2 Green Steel raised a cool $1.6B Series C to help them clean up steel, one of the dirtiest industries and responsible for more than 7% of the world’s global CO2 emissions. Their aim is to reduce carbon emissions from steel production to 0.

France not far behind

Verkor raised a massive $913M Series C. Founded just recently in 2020, they are powering low-carbon battery production in France and beyond.

But don’t ask us, ask our expert founders and investor friends who are exclusively focused on climate technology.

VC perspective


Otto Birnbaum of Revent out of Berlin, is focused on finding early-stage entrepreneurs tackling today’s most challenging climate and societal problems. Here is his take:

Founder perspective


Alberto Mendez of Plexigrid, based out of Sweden, believes we are hitting a mission-critical moment in climate, in part due to the acceleration of EV adoption. He has spent his entire career devoted to the field of renewable energy and sees the grid as the bottleneck to widespread EV adoption. His take on the space:

“We see the grid coming at the center of the energy debate both in Europe and in North America. Policy makers have finally realized that electricity is the single largest bottleneck of the energy transition. In Europe, EU Energy Commissioner, Kadri Simson has written the (now viral) article in FT “There is no green future for Europe without an Upgraded Power Grid”.

She talks about the need for a new generation of grid technology to enable the energy transition. In the US, Bill Gates’ new mantra “no transition without transmission” has resonated across the energy and climate-tech ecosystems. This has generated a dramatic increase in investors’ appetite in the grid management space. Over the last quarter, we have received over 50 meeting requests from investors (almost 2 per working day), including 3 of the world’s top 10 climate-tech funds. A pity we are not raising capital at the moment, but really good news for this vertical in any case.”

PS: Go deeper with Plexigrid, featured recently in our Founder Spotlight.

Alberto Mendez

Data Perspective

As always, we look to assess what’s happening through a data lens. On that note, here is David Smith, our Chief Data Officer shares his take on the Q3 findings.

Concluding Thoughts

Deal volume may not be increasing as much as the VC community would hope, but there is enthusiasm for founders executing on sustainable business strategies with proven market fit. And while AI and climate tech companies have been absorbing the lion's share of top deal activity and headlines, we are content to see far less tourists of entrepreneurship.

Founders with their heads down building, resiliently weathering the slowdown, are more focused than ever on their customers, and proving strong business fundamentals. These entrepreneurs are poised to be in a fantastic position when they are ready to raise.