A 23% drop in funding is a warning to startups

SAN FRANCISCO >> For the first time in three years, startup funding is dropping.

The numbers are stark. Investments in U.S. tech startups plunged 23% over the past three months, to $62.3 billion, the steepest fall since 2019, according to figures released Thursday by PitchBook, which tracks young companies. Even worse, in the first six months of the year, startup sales and initial public offerings — the primary ways these companies return cash to investors — plummeted 88%, to $49 billion, from a year ago.

The declines are a rarity in the startup ecosystem, which enjoyed more than a decade of outsize growth fueled by a booming economy, low interest rates and people using more and more technology, from smartphones to apps to artificial intelligence. That surge produced now-household names such as Airbnb and Instacart. Over the past decade, quarterly funding to high-growth startups fell just seven times.

But as rising interest rates, inflation and uncertainty stemming from the war in Ukraine have cast a pall over the global economy this year, young tech companies have gotten hit. And that foreshadows a difficult period for the tech industry, which relies on startups in Silicon Valley and beyond to provide the next big innovation and growth engine.

“We've been in a long bull market,” said Kirsten Green, an investor with Forerunner Ventures, adding that the pullback was partly a reaction to that frenzied period of dealmaking, as well as to macroeconomic uncertainty. “What we're doing right now is calming things down and cutting out some of the noise.”

The startup industry still has plenty of money behind it, and no collapse is imminent. Investors continue to do deals, funding 4,457 transactions in

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