Sacks @ 00:54:44Right
venturemarkets
In the second half of 2023 and throughout 2024, there will be a major funding crunch for startups: many companies that delayed fundraising will run low on cash, be forced back to market simultaneously, and then confront much tougher funding conditions, leading to widespread down rounds, recapitalizations, or shutdowns.
This tweetstorm is predicting, is that in the second half of 2023 and then 24, you're going to have a huge crunch where all these companies have to go out and raise. They've been waiting, so they're all going to get to the point where their cash is so low they have to go out and raise, and now all of a sudden they're going to be confronted with the new market conditions.View on YouTube
Explanation
Evidence from 2023–2024 shows that Sacks’ forecast of a major startup funding crunch in the second half of 2023 and through 2024 largely played out.
- Sharp drop in available capital: Global startup funding in 2023 fell to about $285B, down 38% from 2022 and the lowest level since 2018, with deep cutbacks across seed, early, and late stage rounds. (news.crunchbase.com) Multiple regions (North America, Asia, Africa, India) described this as a prolonged “funding winter” that continued into at least the first half of 2024. (brecorder.com)
- Down rounds and tougher terms: Data from Carta and other sources show that in 2023, roughly 19–20% of all VC rounds each quarter were down rounds, the highest rates since at least 2018. (carta.com) Preqin similarly reported that by Q2 2023, down rounds had doubled to about 16% of deals, up from a typical ~8%. (businesstimes.com.sg) In 2024, around **20% of all rounds remained down rounds—about double the long‑run average—indicating continued valuation pressure and harsher funding conditions. (forbes.com)
- Startups forced back to market and failing: Carta’s data show record startup shutdowns in 2023 (770 vs 467 in 2022), the highest ever tracked, driven by an inhospitable fundraising climate. (forbes.com) Carta’s 2024 analysis reports that even more startups shut down in 2024 than in 2023, with failures concentrated among companies funded in 2021–2022 that hit the end of their runways and couldn’t raise on acceptable terms. (forbes.com) This is exactly the dynamic Sacks described: companies that had waited were eventually forced to raise in much tougher conditions, leading to down rounds, recapitalizations, and shutdowns.
While there were pockets of strength (especially AI) and the crunch actually began earlier than H2 2023, the core prediction—that a major funding crunch in late 2023 and 2024 would hit startups that had delayed fundraising, resulting in widespread down rounds and failures—matches what happened in the data.