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Leaders and laggards: How startup verticals fared in 2023

Defense tech led and ecommerce lagged in PitchBook’s 2023 battle of the VC verticals.

Have things gone from bad to worse for startups in 2023?

If you look at the deal values, deal counts and valuations of the most prominent sectors in the VC ecosystem and compare the results to 2022—which was itself a weak year relative to 2021 highs—it will certainly feel that way.


We examined the performance of a dozen tech verticals and discovered that they all hauled in fewer deals and dollars in 2023 than they did in 2022, according to PitchBook data. Median valuations also dipped in 10 of the 12 sectors.

Still, VC activity declined a lot more in certain verticals than in others.

Relative laggards

Ecommerce was highly unpopular with VC investors in 2023. The vertical’s deal value dropped 77% year-over-year as of Dec. 12, while deal count fell 56%. Online shopping sites struggled to stay afloat in the face of competition from Amazon’s low prices and amid rising marketing costs on Google, Facebook and Instagram.

But not all VCs have given up on ecommerce. Kyle Lui, a general partner at Bling Capital, said that out of the opportunities he is most excited about backing startups that develop novel ways of selling to consumers and other retailers online. AI-powered companies such as Lily AI are making strides in helping shoppers discover products. (Go deeper: Q3 2023 E-Commerce Report)

Crypto and blockchain startups went from red-hot to near-freezing following the collapse of FTX in late 2022. VCs decreased their investments in the sector by 69% and 51% on a deal value and count basis, respectively. Even investors with crypto-focused funds largely stayed on the sideline in 2023. But if the recent bitcoin rally holds, the sector could thaw in 2024. (Go deeper: Q3 2023 Crypto Report)

Edtech is another vertical that experienced less interest from VCs in 2023. Not only have investors poured considerably less capital into startups that teach children and adults with the help of technology, but no other sector saw its median valuation fall by nearly half. While few investors expect edtech’s appeal to return to its pandemic-era glory, generative AI can boost the industry in the coming years.

“I think there will be some really big companies [in edtech],” said James Currier, general partner at NFX. “AI will make it so much better than the old world.”

Relative winners

Agtech wasn’t an especially popular vertical with VCs in 2023—investments dropped by 41% on a deal value and count basis. But we consider agtech a relative winner because the median valuation for agtech companies jumped 10% year-over-year, more than for any other vertical in the data set.

“A lot of people suddenly realized that being dependent on global supply chain [for food] is a problem,” said Maelle Gavet, CEO of Techstars. She added that the current period may be the first one since World War II when the Western world has concerns about potential food shortages, which make startups that help grow food efficiently and sustainably attractive.

Alex Frederick, a senior PitchBook analyst focused on agtech and foodtech, said he suspects that “fewer deals are being disclosed, omitting many down or flat rounds.” (Go deeper: Q3 2023 Agtech Report)

Artificial intelligence certainly captured investors’ imaginations and many pages in their checkbooks in 2023. But the year’s most hyped sector saw fewer deals and dollars this year, PitchBook data shows.

What could explain the decrease? Investors favored generative AI companies launched by repeat founders or research scientists from OpenAI or Alphabet‘s DeepMind. As for the eye-popping valuations, they were also reserved for select companies. Prices for the wider AI and machine learning sector increased by 5%. (Go deeper: Q3 2023 Artificial Intelligence & Machine Learning Report)

Defense tech is a newcomer to PitchBook’s emerging tech laggards and leaders board—and if this is a battle, we’d say defense tech has won it. The vertical had only a slight decrease in deal value and median valuations have remained unchanged since last year.

After years of shunning defense tech, investors started to flock to companies in the sector. National security became a concern amid the technological arms race with China and wars in Ukraine and Israel. The success of companies such as Anduril and Palantir showed investors that a more significant portion of the Pentagon’s growing budget could be captured by VC-backed startups rather than traditional defense contractors such as Lockheed Martin and Raytheon. (Go deeper: 2023 Vertical Snapshot: Defense Tech)

Featured image by Ratana21/Getty Images

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