Even as Y Combinator reveals the latest startups in its cohort for this winter, we have poor news for founders: The global venture capital market shrank in Q1 2023, and it would have been even worse if it were not for a few mega deals, according to Crunchbase (disclosure: my former employer) and PitchBook reports. And here in the United States, things are looking grim.

Startups are not the only ones suffering, either. Venture capitalists are also seeing their ability to fundraise being hampered as they digest a raft of mismarked startup deals from the last boom and a dearth of exit volume.

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This dip in funding for venture investors implies that the current startup investing downturn may not turn course anytime soon.

The Exchange will have notes soon on what appears to be an expanding cohort of startups that may be the first companies to pursue IPOs when the market reopens. But for now, we’re stuck looking at money flowing into startup land, not the other way around.

There’s little good news to be found in this Q1 data, but don’t let that stress you. The numbers aren’t great, sure, but they’re also not quite as bad as we feared heading into 2023 last year. Onward!

Global venture capital is in retreat during Q1 2023

Crunchbase data indicates that total funding for startups in the first quarter globally fell to $76 billion from $162 billion from a year earlier. Given that the early 2022 months were not that far from the peak of the last startup cycle, this comparison is somewhat specious: We all know that things have slowed down since then.

Zooming in, the total value of startup investment in Q1 2023 actually rose by 1% compared to Q4 2022, which is a more recent and therefore more useful comparison. Up is good, right? Why are we carping about declines if venture totals are no longer pointing toward the ground?

Here’s how my longtime friend and former collaborator Gené Teare described the nuance in the first-quarter numbers, writing that the small gain in first-quarter dollar totals includes:

“a reported $10 billion investment into OpenAI — largely from Microsoft — and a $6.5 billion round for payments giant Stripe. Without those two large deals, Q1 venture funding would have been down even more dramatically, close to $60 billion.”