Startups’ Annus Horribilis—and What Comes Next

If 2022 was a year of shock and denial for tech founders and investors as stocks collapsed, 2023 was a year of acceptance of their harsh new reality.

Startups slashed headcount. Founders swallowed their pride and accepted ego-shattering down rounds just to survive. Venture capitalists cut ambitious targets for the size of their next funds and made tough choices about which startups in their portfolios they would keep supporting—and which ones they would leave to die. They soured on many of the sectors they had once celebrated, such as fintech, cryptocurrency and the creator economy. And big swaths of Silicon Valley had a momentary panic attack with the collapse of Silicon Valley Bank earlier in the year.

But what made 2023 more extraordinary was that the party music got louder in one corner of tech—artificial intelligence—even as it fell silent throughout the rest of the industry. Money poured into OpenAI, Anthropic and other AI startups from venture capitalists and big tech companies such as Microsoft, Amazon and Google. “The only people that had a good time [this year] were early-stage AI companies,” said Immad Akhund, founder and CEO of fintech startup Mercury.