Los Angeles 2H 2023 Seed Report

We’re excited to share the most recent update of our LA Seed Report, encompassing all seed funding to SoCal companies in the second half of 2023.

In 2023, funding to US based companies fell to just $138B, down “37% YoY.” Looking just at Seed stage funding, 2H ‘23 deals totalled $6.4B, down from $7.9B during the same period last year. A lackluster year for fundraising ended with an anticlimactic quarter with reduced spending in all stages excluding Seed. Broken down by quarter, US Seed funding held steady between Q3 and Q4. 

When we look at Los Angeles deal-making, the second half of 2023 represented a 17% decline in seed dollars deployed against the second half of 2022 (down to $424 million from 2022’s $513 million). In terms of deals done, 2H ‘23 saw a 20% decrease (98 down from 121 in 2022). Deal volume was nearly identical between 1H’ 23 and 2H ‘23, as were dollars deployed, with # of deals done cresting predictably  in Q2 and falling thereafter. 

Q3 ‘23, saw a 30% decrease in deals done compared to Q2 ‘22 (53 companies, $230.5M). Interestingly, dollars deployed shrunk proportionately YoY, indicating that while investors were hesitant to invest too often, they held round sizes fairly steady. Meanwhile, Q4 '23 saw an identical number of deals done as the year prior (45 companies, $194.5M), and a slight bump in dollars raised (4%). Broadly, the step down from Q3 activity to Q4 activity in 2023 was far less pronounced than it has been historically for the past 3 years. 

When we turn to deal sizes, Q2 of 2023 saw an average round size of $4.3m with Q4 holding steady at the same figure. Of course, when we exclude the monster deals above $10m, the average drops to $3.6m in Q1 and $3.5m in Q4. All deals included for 2H ‘23, and assuming 20% dilution, it looks as though the average post money valuation for seed deals clocked in at ~$21.7 million (down slightly  from $22.5 million for 1H ‘23). 

Which sectors kept investors active? Looking at all of US dealmaking for 2H ‘23, manufacturing and cleantech startups were the most immune from the broader market decline. Mirroring national trends, SoCal’s aerospace and manufacturing companies comprised 11% of all deals for 2H ‘23 (up from just 6% in 1H ‘23), making it the 4th most funded sector. Likewise, hardware deals saw nearly double the amount of funding in the second half of 2023 than they did in the first. One category Los Angeles investors continued to sour on was blockchain, halving dollars allocated and deals done. 

Curiously, funding for mobile based companies doubled between 1H ($34.64M) and 2H of 2023 ($59.65M), likely fueled by experimentation in consumer facing AI applications (and perhaps an explanation for the plummet in eCommerce funding). Speaking of the artificially generated elephant in the room, a quarter of all deals for 2H ‘23 referenced Machine Learning or Artificial Intelligence in some way in their Crunchbase descriptions (and they received ~$111M in capital). 

Below are a few key trends from LA seed deal activity in the second half of 2023:

• Media and Entertainment overtook Health and Wellness as 2H’s top sector. 

• The number of mega deals fell, with the vast majority of deals getting done in the $2M - $3.99M range. 

• 2H of 2022 saw 16 eCommerce deals and $73M allocated. 2H 2023 saw just 2 eCommerce deals and $16.43M in capital. 

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Amplify is a first check fund backing LA’s earliest and strongest tech teams. You can get in touch with us here.

(Our report covers seed deals that have been publicly announced. Please reach out to [email protected] with any questions or comments.)