Tech Rundown: 3200 startups shut

Hello there,

Here’s today's tech rundown — everything you need to know from the world of tech in 3 minutes!

In today’s email:

• A tough year for startups

• Denver beats San Fran in AI category

• Most common mispronounced words

The Lead Story

The past year has been a tough ride for startups—dismal might even be an upgrade.

PitchBook's latest data reveals 3,200 venture-backed startups have closed this year, raising a staggering $27b in the process. That's an average of $8m per venture that didn't quite make it.

However, this figure may underrepresent the broader sentiment. Some startups were probably acquired or bought out of bankruptcy at significantly lower valuations (like Volta and Doubtnut), while others quietly closed shop with little media attention.

What's behind this startup decline? Unsurprisingly, it can be attributed to rising interest rates, which have led to a significant increase in the cost of capital. This is affecting both investors and companies servicing debt with rapidly escalating costs.

There's one exception to this downward trend: AI startups. In the first eight months of this year, 26% of funding went to AI-related companies, more than double the percentage from the previous year (11%).

A few takeaways emerge when examining these decreasing figures:

1. Healthy Reset: The downturn serves as a healthy reset for the tech ecosystem. The hype cycle of 2018-21, accompanied by a flood of cheap capital, often funded questionable ideas. Ideas like pizza making robots, multiple OKR startups, and crazy money for JPEGs. Now, the focus is shifting to companies addressing deeper, more tangible problems.

2. Unit Economics: Faced with a funding desert, tech companies are prioritising unit economics. Trimming headcount and sharpening their USPs is helping them extend their financial runway, facilitating their transition to companies that generate value without constant external funding.

So, what's on the horizon for 2024?

Looking ahead, we can expect larger funding rounds and slower growth. Founders who weathered the storm of the last two years will hopefully apply lessons learned, adopting a more measured approach to growth.

Early signs also point to a more positive outlook for the tech ecosystem. With venture capital funding rebounding and a wave of upcoming IPOs promising recycled capital for early-stage startups, there's reason to approach 2024 with cautious optimism.

As the startup landscape recalibrates, entrepreneurs and investors alike are gearing up to navigate changes and capitalise on the potential upswing in the tech sector.

More Tech News

AI Rulebook: EU reaches a comprehensive deal for AI rules, creating a framework it believes can help new tech companies thrive (more)

Relationship Review: UK watchdog to review if Microsoft’s relationship with OpenAI should be viewed as a merger (more)

Google Gimmick: Search giant admits that a video showing off new AI model (Google’s Gemini) was edited to look better (more)

Meta Security: Facebook and Messenger now fully encrypt messages; plans for similar approach for Instagram in 2024 (more)

Mile High Winners: Denver is the top metropolitan area where businesses are adopting AI, beating out tech stalwarts like San Francisco (more)

VC Funding

X-Energy is developing small, modular nuclear reactors for eventual commercial use. Raised $80m (more)

Scalable Capital is a digital investment platform, operating largely in Europe. Raised $66m (more)

Strong by Form is developing a robust timber bio-composite that aims to be a green alternative to concrete. Raised $5m (more)

Rhythms leverages AI to highlight working patterns of top performing individuals within companies. Raised $26m (more)

PayGround provides families with a digital wallet to manage and pay medical bills. Raised $20m (more)

Poppy helps couples pick and fulfil their wedding flower needs. Raised $7m (more)

Leonardo AI is an AI image generator tailored for the creative industry. Raised $31m (more)

Useful Sites

Ad Speedup: Speed up video ads

Popcorn: Wordle for pictures

Nomad Living: Rental spots that cater to remote workers

Chart of the Day

Distractions

Board member who clashed with Sam Altman shares their story

Most mispronounced words of 2023

Need a Xmas gift? How about an eye massager

ps: we love feedback — Email us to let us know your thoughts or what you want to see covered in future newsletters. We respond to every email!