Minnesota Companies Face Tough Year for Venture Capital in 2023

The Challenges of Fundraising in 2023 for Venture-Backed Companies

In 2023, venture-backed companies faced significant challenges in raising capital from investors. The due-diligence process was extended, and investors were cautious with their spending. This cautious approach was driven by concerns about a potential recession, rising inflation, and federal interest rate hikes. As a result, U.S. companies raised $71.6 billion less in private investor capital compared to the previous year, with Minnesota companies also experiencing a decline in funds raised. Sean Higgins, founder of St. Paul software company BetterYou, reported that it took him close to eight months to raise $6 million, whereas in previous years, it would have taken half the time. The cautious funding environment led to lower valuations and more stringent investor scrutiny.