If a venture-backed company has gone more than four years between funding rounds, the forecast generally looks dim. It becomes increasingly unlikely that it will secure another good-sized financing or a sizable exit.

Four-year funding gaps are especially top of mind these days, as it’s been that long since U.S. venture investment hit its all-time peak. During the boom that lasted from 2020 to early 2022, software companies in particular routinely raised megarounds at rich valuations.

That, as we know, resulted in some strong exits, a lot of mediocre outcomes, and quite a lot that haven’t flourished.

Stranded software unicorns

For many, flush times came to an abrupt end. Per Crunchbase data, more than 150 boom-era U.S. software and software-related companies with $100 million or more in equity funding have not raised capital in over four years, remain private and have not been acquired.1

Collectively, they were a well-funded bunch. Companies in the cohort that raised their last round during the peak��2 pulled in over $51 billion in aggregate funding, per Crunchbase data.

The list also contains a number of companies that were fairly high-profile startups several years ago. Examples include:

: The equity and fund management software platform raised close to $1.2 billion in total funding but hasn’t reported a new round since 2021.

: The NFT marketplace operator raised over $427 million in equity funding but closed its last round just over four years ago.

: The developer of the popular scheduling app secured $350 million in 2021 and hasn’t raised a round since. Since Calendly was mostly self-funded for its first seven years of existence, however, we’d guess it’s not a company that’s likely to be in financial distress.

Using Crunchbase data, we put together a longer sample featuring 10 companies.

Where are they now?

The ranks of companies that haven’t raised for years include a mix of those that are still active, have shuttered or are quietly winding down. For software startups in particular, many can continue eking along with a skeleton staff and a sparsely supported offering without formally shutting down. Or, they might be doing fine, given the capital they raised at the peak.

Given these are private companies, we can’t peek under the hood regarding details of their financial condition. All we can say is they haven’t disclosed a new round for some time.

Related Crunchbase query:

Related reading:

• Global Venture Funding And Unicorn Creation In 2021 Shattered All Records��

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Investors poured in $700 million into two AI startups Tuesday — and — seemingly marking another level of the AI craze that has dominated the private markets since late last year.

Leading the way, Anthropic — a rival with its AI assistant Claude — raised $450 million in Series C funding led by with participation from , 1, , and others.

“We are thrilled that these leading investors and technology companies are supporting Anthropic’s mission: AI research and products that put safety at the frontier,” said CEO in a . “The systems we are building are being designed to provide reliable AI services that can positively impact businesses and consumers now and in the future.”

The round comes after earlier reports in February that Google had invested between $300 million and $400 million into the San Francisco-based startup. That was followed in March by that Anthropic was raising another $300 million round at a pre-investment valuation of $4.1 billion.��

Anthropic itself has previously announced a $124 million in a in 2021 and a $580 million Series B in 2022 — led by none other than disgraced founder .

But wait, there’s more

While Anthropic was announcing its massive raise, another AI startup across the pond was raising some cash of its own.

London-based Builder.ai raised a Series D of more than $250 million led by . Other investors included , and .

The company, which uses AI in its software development platform, did not disclose a valuation, but said its valuation increased as much as 1.8x, presumably since its last raise in 2022.

Earlier this month, — which has AI aspirations of its own — and Builder.ai announced a partnership which included an equity investment in the startup.

Founded in 2016, Builder.ai has now raised more than $450 million.

AI frenzy

With so many big rounds getting announced, it’s now getting to the point where one has to wonder if all these investments themselves are actually AI generated.

VCs and large strategics including Microsoft, Google and all continue to show unabated interest in generative AI startups.

Last month , an AI-enhanced market intelligence platform, raised $100 million from investors that included — ’s independent growth fund.��

In March, closed a $150 million Series A at a $1 billion valuation led by . The Palo Alto, California-based AI startup allows people to create their own personalized AI chatbot using language models and deep-learning algorithms.

Also in March, San Francisco-based raised $350 million in a Series B — at a post-money valuation of at least $1 billion.

Of course the craze started in January with news of Microsoft’s massive $10 billion investment into — creator of .

Further reading:

• Salesforce And Its Venture Arm Latest To Join AI Craze
• We’ve Seen This Before: Investors Take To The Next Shiny Toy — AI
• AI Startup Anthropic Raising Another $300M At $4.1B Valuation — Report
• Adept Latest AI Startup To Raise Big — Nabs $350M
• Character.AI Hits Unicorn Status With $150M Raise As AI Craze Continues
• Startup AlphaSense Snags $100M As AI Stays Hot; Alphabet’s CapitalG Invests

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Rising interest rates make money more expensive, but those in the industry say both private equity and strategics have significant capital to get deals done now that prices have come down.

“It’s true debt is more expensive, but valuations are coming down,” said , senior managing director and head of investment banking at .

Although 2022 couldn’t come close to the robust number of deals announced in 2021, it was on par with previous years — with more than 1,070 VC-backed startups in the U.S. getting bought, according to Crunchbase .

However, it is interesting to note dealmaking in the space did drop off as the year went along. The fourth quarter of 2022 was on pace to be the slowest of the year, perhaps dragged down by an uncertain economy and fears of a recession.

Big deals

Some of the biggest deals of 2022 involving VC-backed startups in the U.S. included:

• In September, agreed to acquire San Francisco-based collaborative design platform for $20 billion in cash and stock in the largest purchase of a U.S. private, venture-backed company in 2022.��
• In January, announced it will buy Alameda, California-based device software company for $4.3 billion.
• Also in January, acquired Bellevue, Washington-based gaming company for $3.6 billion.��
• In May, bought Cambridge, Massachusetts-based clinical-stage biopharmaceutical company for up to $3.3 billion.

Three of those deals occurred in the first half of the year, when the market was still riding the tailwinds of 2021. While the dealmaking market started slowing as 2022 wore on, most saw that “wait-and-see” attitude from buyers changing as potential targets started to run low on cash.

“Companies will want to raise capital, but are looking at what will be a dual-track process,” said Nash, meaning startups will be looking at both fundraising deals as well as possible sales.

“Our initial prediction is that volume picks up, but dollars will not” in 2023, said Nash. He added he expects dealmaking to pick up as the year wears on.

Valuations drop

In addition to the need for cash, many startups are not nearly as expensive as they were even as recently as the start of 2022.��

The skyrocketing valuations in the private markets and the option to go public via a SPAC left many would-be corporate acquirers on the sidelines, said , managing director at .

“The drop in valuations in public markets and the ensuing drop in valuations for many startups will bring pricing back in line,” he said.

, general partner at , said even with dropping valuations, the�� question is whether the buyers will be similarly motivated.��

“For the most part, their motivation will be ‘wait and see’ and there isn’t much of a rush, especially because of a perception that the market hasn’t hit bottom,” he said.

However, private equity is sitting on more dry powder than ever before — over $1.5 trillion — and strategics have perhaps been timid because of what had been until more recently a frothy market.

“You have large companies that are scaling back right now,” Nash said. “So they may start cherry-picking really interesting companies.”

Nash said that is especially true as cutbacks at these companies could have stifled innovation, which they may now need to acquire.

Also, big tech companies like , and have — despite a brutal 2022 that involved layoffs — significant cash and could put it to use now that the market has turned back to their favor.

Affected areas

Where that dealmaking may occur could be the real question.

Nash said the IPO backlog has affected industries including health care, fintech and consumer tech the most. He added fintech could be a good spot to cherry-pick some of the best companies as funding dries up.

Other areas, such as renewables and cybersecurity, also could see activity — although valuations in cyber have not been affected as much in the recent downturn.

, founding director of San Francisco-based financial advisory firm , said while M&A activity was down year over year, 2022 should still easily be the best year ever for dealmaking, with the exception of 2021.

He expects 2023 to be another big year — certainly in terms of volume.

“As the funding crunch has continued for a bit longer than most expected in 2022, and many companies face considerable ‘down’ rounds in their next capital raise, M&A activity will likely increase, albeit at lower valuations than in prior years,” he said.

While interest rate hikes could curtail some dealmaking, said the market may see companies explore alternative financing plans and an increase in equity components as cash becomes more expensive.

“I don’t think the overall M&A numbers will stay down due to hikes, but we could see certain industries’ numbers fall,” he said. “Overall, I think we will continue to see a steady pace of M&A deals into 2023, but it won’t quite be the historic highs of 2021.”

Citing sources briefed on OpenAI’s recent pitch to investors, Reuters said the San Francisco-based organization expects $200 million in revenue in 2023 and $1 billion by 2024. OpenAI makes money by charging developers to license its technology to generate text and images.

OpenAI was co-founded in 2015 by , and others. It first drew mainstream attention for DALL-E, an AI that can create detailed, realistic images (whether to call them “art” ) in any style of almost any subject, based on written prompts from users.

Last month, OpenAI unveiled ChatGPT to the public. The chatbot, which can perform search queries and write entire essays based on prompts, immediately garnered attention in the tech and media worlds —��not least from writers worried it’s so good, it could soon replace us.

Big bucks go to AI

Artificial intelligence as a whole is one of the most heavily funded startup sectors. Funding to AI startups in recent years has accounted for as much as 10% of all global venture capital dollars invested, Crunchbase data shows. Last year, nearly $70 billion in venture capital went to AI startups worldwide.

Along with OpenAI, the most highly valued startups in the space include data and AI company (valued at $38 billion), driverless auto company ($30 billion), and AI writing assistant service ($13 billion).��

OpenAI alone has raised more than $1 billion in venture funding, according to Crunchbase data, with as its largest investor. , , and have also provided capital.��

The organization was recently valued at $20 billion in a secondary sale of its shares, Reuters reported. Its supporters see potential for its technology to generate huge amounts of revenue by automating even creative tasks like writing and design.��

Still, several prominent VC firms declined to invest earlier this year, “questioning if it could justify a higher valuation or compete with rivals like Inc.-owned ,” Reuters reported, citing sources familiar with OpenAI’s fundraising efforts. (Though the report didn’t say, it’s reasonable to assume OpenAI’s unusal cap on venture returns played a role in investor reticence as well: In 2019, OpenAI that limit the returns for its investors to 100x, or possibly less in the future.)

Microsoft also provides OpenAI with computing power. The software giant increasing its stake in OpenAI, believing that its artificial intelligence technology could generate business for Microsoft’s cloud business as more companies embrace AI and automation.

“We’re going to see advances in 2023 that people two years ago would have expected in 2033,” Microsoft President told Reuters in an interview. “It’s going to be extremely important not just for Microsoft’s future, but for everyone’s future.”

Related Reading:

• Writing-Focused Startups Draw Big Bucks
• The Promises And Perils Of A Decade Of AI Funding
• Billions Of Dollars Roll Into AI-Enhanced Cybersecurity
• AI Could Transform Medical Imaging — So Why Don’t We See It More?
• From Wigs To Fish, Some Very Quirky AI Startups Got Funded In 2022

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It’s one of several startups diving into remote patient monitoring (RPM), a rapidly growing industry that saw favor post-pandemic as the world’s hospitals were short on beds and clinical practices shuttered their doors.��

Per Crunchbase data, the RPM sector saw a 240% increase in funding between 2020 and 2021. So far in 2022, the area raised more than $220 million in funding, which is larger than any other year besides 2021.��

Not enough labor in health care ��

Remote patient monitoring had long been heralded as a way to help doctors treat patients without seeing them regularly. Using medical devices, physicians could track patient health outside of the clinical setting and intervene early if necessary.��

But for a long time, this class of technology couldn’t win over doctors and insurers, who were slow to embrace these devices.��

So what’s fueling the new wave of funding?

“We’ve hit the wall in terms of human resource shortage. We just don’t have enough humans to take care of other humans on the planet,” said health care consultant , who serves as CEO of , a remote patient monitoring startup with a flagship use-at-home stethoscope.��

“Probably one of the top three problems that hospitals are facing is that they just don’t have enough nurses,” said Smith. “They just don’t have enough people. There just aren’t enough doctors. And so remote monitoring essentially improves efficiency.”

The promise of RPM

The goal of RPM devices was meant to help doctors track their patients between appointments, and develop a better snapshot of how patients fared in their everyday lives outside of the clinic.��

This was especially crucial for patients with chronic conditions with poor disease management, and would allow the doctor to intervene before an upcoming appointment.

“God forbid something happens in between the first visit and the second visit,” said , principal investor at , who is focused on health care investments.

But early remote patient monitoring devices faced a few key challenges. Comprehensive data tools oversaturated doctors’ offices with bits of data collected over the days and weeks of every minute of every patient. This forced clinicians to either sift through a mountain of numbers or ignore it.��

Setting up the technology also proved challenging. Some patients, especially older individuals, ran into troubleshooting issues. This rendered the devices useless and turned workers at doctors’ offices into IT help, creating inefficiencies at clinics.��

There was also very little insurance support, which meant a doctor rarely got paid for giving patients an RPM device.

“A lot of the art of good health care companies is figuring out how to really become part of a doctor’s workflow in a way that really helps them take care of a patient but doesn’t give them a ton of noise,” Effron said.��

Shifting factors

But the tide is turning.��

In 2018, insurance companies created a set of billing codes that allowed doctors to prescribe wearables and bill insurance companies, spurring financial incentive. During the pandemic, to further incentivize using remote patient monitoring technology.��

The technology itself also improved. An increasing number of startups are creating software to pair with medical devices. Leveraging artificial intelligence and machine learning, medical device software can predict changes or irregularities and alert the doctor, as opposed to dumping data on their lap.

How they work

General Prognostics, the two-year-old blood tracking startup, received funding from the likes of , president and CEO of , and .��

The startup provides a wearable sensor for people at risk of heart failure. The sensor, along with the app, collects data on key blood biomarkers like NT-proBNP (which is responsible for cardiac-related functions) throughout the day and alerts the doctor of any abnormalities.��

“That’s really important for doctors to know because that tends to happen well before the patient becomes symptomatic,” said , CEO and co-founder of General Prognostics. “And that gives the doctor an opportunity to say, okay, let’s adjust your medications because it looks like you’re destabilized. And if [they] can adjust your meds and get you back stable, we can avoid a hospital visit.”

General Prognostics is currently conducting a clinical study and the company’s AI is trained on data collected from the participating patients.��

The company says it will meet data requirements from the as well as compete with data competitors in the space have collected. By May 2024, the company expects to get clearance from the FDA and start releasing its device to the public.��

Several of these startups also manage the logistical work of using RPM, unburdening doctors when patients run into issues. For example, , which has an at-home kit that monitors patient vitals, sets up its devices in a patient’s home. Athelas raised $59 million in January, the largest raise in the RPM space so far according to Crunchbase data.��

Preventative care and power of data

In recent years, there has been a push to collect and leverage data in the health care system to help public health officials, hospital systems and physicians create better predictions about patient health.

This data informs better preventative care, which keeps disease and surgery at bay and proves far cheaper than reactive health care

As a result, it can be argued that RPM startups like General Prognostics play a key role in keeping health care costs low.

For instance, while General Prognostics is currently testing an RPM device to monitor heart failure called CardioID, the same platform could help the startup create software that tracks creatinine–a strong biomarker for kidney failure.��

Those with general heart diseases may also want to monitor potassium. And everyone from doctors to patients want to monitor these levels in a noninvasive way that doesn’t involve getting blood drawn regularly.��

“The blood is a very good representative of what’s going on in the body. In the ideal world you should just be able to get that data anytime, anywhere,” said , co-founder and advisor at General Prognostics. “But it’s not the case, we don’t live in that world.”

Problems down the road

With multiple startups popping up, all with gadgets and apps and cloud systems, the RPM industry must brace for consolidation.��

This is especially an issue for what is : Baby Boomers, who will soon become the oldest and longest-living generation in recent history.��

Saddling these users with a handful of disparate devices, all of which perform different functions and require troubleshooting, could defeat the purpose of RPM altogether. Without patient adoption, physicians can’t utilize any new technology that enters the market.

“Every company that makes a device has delusions of grandeur that the world revolves around their gadgets,” Smith said. “The result is just a chaotic mess where nothing really works very well. And getting patients to try and do this stuff is just way too complicated.”

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For retailers, this has translated into fewer buyers for items like clothes, furniture and gadgets. shares tanked earlier this week after the retailer said it is having to cut prices to reduce merchandise levels, which brings profits down. Items like kitchen appliances and exercise equipment that were backlogged a year ago are now overflowing stores and warehouses.��

The slowdown also has extended to providers of backend software and services to online retailers. This week, —the stock market poster child for the e-commerce boom of 2020 and 2021—posted a quarterly loss and downwardly revised forecasts, and said it will cut 10% of its workforce.

Shopify shares, down about 80% from highs last fall, are also emblematic of broader sector woes. Others in the e-commerce software space, including relatively recent market entrants like and , are also down sharply.

For startup investors in the retail-focused SaaS startups, meanwhile, all of this is happening at a particularly inconvenient point in time.

That’s because last year, investment in e-commerce software companies hit an all-time high, with more than $4.8 billion in global venture funding, per Crunchbase data. This year started hot as well, with a decline in funding in the past couple months only slightly offsetting a rollicking first quarter. For perspective, we chart out investment to the space for the past 5+ years below:

Where did venture investments go in 2022?

, a provider of tools for retailers and brands to beef up their e-commerce presence, was the largest equity funding recipient in the space this year, per Crunchbase data. The Boston-based company closed on a $200 million Series F round in April at a $2 billion valuation.����

Other big funding recipients included:

• Austin-based , developer of an analytics platform for brands to accelerate online growth, was another big funding recipient, raising $240 million in a February debt and equity round.

• Lehi, Utah-based , a provider of package-tracking tools for online orders, raised $200 million in a January Series B at a $1.25 billion valuation.
• Boston-based , developer of an AI-enabled platform for online customers to find products, raised $169 million in a June Series C.��
• Toronto-based , which pitches itself as a commerce platform aimed at helping online brands “go borderless,” raised $150 million in a January Series C round led by .

Notably, big financings followed several quarters of sharply rising revenue for funded companies.

Salsify, for instance, said it generated over $110 million in annual recurring revenue in 2021, up over 50% from 2020. Cart.com, meanwhile, said its revenue grew over 400% in the year leading up to its last funding round.

Market conditions, however, are sharply different from even a couple quarters ago. And the swell in online shopping that began in the early days of the pandemic has since receded.��

As Shopify CEO in a letter to employees this week, when the COVID pandemic set in, almost all retail shifted online, and demand for software to help with that shift skyrocketed.��

“We bet that the channel mix—the share of dollars that travel through e-commerce rather than physical retail—would permanently leap ahead by five or even 10 years,” he wrote. “It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-COVID data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful five-year leap ahead.”

For venture-funded e-commerce software software startups, it’s likely a similar trajectory will apply. ������Ƶ haven’t abandoned their online shopping carts. And it’s reasonable to expect steady growth ahead. But the environment is now one in which supercharged growth will likely be much harder and costlier to achieve.

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Since its inception in 1995, Insight Partners says it has put more than $700 million into Israeli companies. It currently has 15 active investments in the country. Portfolio companies include app developer , application security solution , management software startup (which we covered here), and digital adoption platform .

One of its success stories in the region lies in , which has developed a popular cloud-based web development platform. Insight Partners co-led its $40 million in 2011 and says it “supported” the company “through to IPO.”

Insight Partners Senior Associate has relocated to Tel Aviv from New York with his family to head up the office.

I was curious if the opening was an intentional move by the firm to expand outside the United States. But , a managing director of Insight Partners, told me that the decision stemmed from the growing tech hub’s appeal.

“We didn’t really approach this from the perspective of wanting to open an office somewhere,” Wardi said, calling the decision a “big deal.” “It was driven by the fact that we’ve been investing in Israel for quite a while. There’s been a rapid ramp up in pace in the last few years, and we’re seeing tremendous opportunity in the market.”

By being on the ground there, it’s Insight’s goal to be better able to support its portfolio companies, and also get exposed to other opportunities “at an earlier stage” than it would have been able to otherwise, according to Wardi.

With over $20 billion under management, Insight Partners is focused primarily on software investments, mainly B2B software in its different forms. Through its Onsite operation group, it aims to support its portfolio companies with sales and marketing, customer success and talent recruitment efforts.

Insight intends to not compete with local VCs but instead plans to “double down” on working with earlier-stage funds in the region, Wardi said.

I was also curious if having a presence in the region meant that Insight would be looking to invest in the Middle East as a whole. Wardi said the office would “strictly” be focused on Israel.

In September 2018, our own Joanna Glasner took a look at the country’s startup scene. In August, Natasha Mascarenhas covered how was��raising a $75 million fund to invest in Israel-based startups.

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A few weeks back the Crunchbase News team published a raft of information regarding the global and U.S. venture capital markets, along with dives into popular markets like Texas domestically, China globally, and more. One data point that we don’t track, however, is the percentage of ‘up rounds’ versus ‘down rounds’ in the period.

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In English, that means we don’t keep tabs on how many startups out of 100 who raise more capital do so at a higher valuation (price increase) or lower valuation (price decrease). It’s useful data. And so, when a new report dropped including the information we took note. Let’s explore.

Up Rounds

The Q2 (a that works with startups) venture capital survey writes that in the second quarter, “[u]p rounds exceeded down rounds 86% to 6%, with 8% flat in Q2 2019, an increase from Q1 2019 when up rounds exceeded down rounds 81% to 11%, with 8% flat.” I imagined that the preceding 81 percent rate was high; to see it rise to 86 percent one quarter later in the same year was eye-opening.

Luckily for us, Fenwick et al graphed their findings. Observe:

The chart shows us that not only was the Q1 81 percent up-round percentage tied for the local maximum, Q2’s 86 percent is the highest result in years. (An extended version of the same chart shows that the Q2 2019 up-round percentage is roughly tied for the all-time high set in early 2015.)

In contrast, while up rounds reached their recent zenith, down rounds slipped to their smallest portion of new capital events. Indeed, while up rounds reached their highest known percentage, down rounds managed to dip under flat rounds.

This may be all a bit more grokkable if we turn to probabilities. Here’s how it shakes out: If a company raised in the second quarter of 2019, it had about a 1 in 16 chance of raising at a lower price, about a 1 in 13 chance of raising at a flat valuation, and a about a 1 in 1.16 chance of raising at a higher price. Those are good odds!

Not All Good News

The whole Fenwick document is worth reading () because you should imbibe the full context of the above information. That setting includes some weak points worth noting while we’re here highlighting yet another bullish indicator.

Chief among which is a modest dip in the pace at which companies raising their Series D can boost their valuation, and a slightly sharper drop in “Series E and higher” up valuation increases. What that means is that the amount that companies raising a Series D, Series E, or later round can expand their value in between rounds is falling.

Not much, mind; the amount that Series D rounds repriced companies��up was still 89 percent after its decline. That’s not bad. But “Series E and later” price changes fell more sharply to a mere 39 percent gain.

This hints at a few things. Perhaps as startups reach deeper into the private markets, IPO prospects (ie the impact of public pricing on private valuations) is kicking in a bit more sharply, slowing private-market value accretion at late-stage startups. Or it could be that worry concerning the number of unicorns that will make it to a public offering before a correction is slowing super late-stage valuation growth.

You can fill in your own guess. What matters as a takeaway is that while early, and mid-stage startup valuations (Series B and C, say) are looking strong, things are weaker towards the end of the private capital game.

The Vision Fund 2 cometh, but perhaps not soon enough to reprice everyone at once. So, if you are looking for some big, late-stage checks, mind your expectations. For the rest of the startup world, the chances of raising at a nice premium from your last private round look good.

And those odds look the best for software-focused startup companies. Why? Because of all the categories of startups that Fenwick examined, the sharpest valuation increases were given, on average, to software firms. Once again, why? I’d reckon because as the public market rains favor on similar companies, venture capitalists can’t help but pay a little more for their smaller, private relatives.

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