The amount of venture capital raised by American startups fell by 55% between the first quarter of 2022 and the same period this year.

Early-stage startups are having it tough because of the sharp decline in venture capital funding. According to Pitchbook data cited by Bloomberg News on Thursday, July 6, American investors supported 3,011 startup deals in the second quarter of 2023, a third fewer than they did in the corresponding period in 2022.

These venture capital (VC) firms also spent less, just under $40 billion, or roughly half as much as they did the previous year. For startups still in the concept stage, angel or seed deals saw the biggest decline.

The lower numbers, according to Pitchbook analyst Kyle Stanford, weren’t necessarily a bad thing. Since the markets can only support a certain number of public listings, he claimed that there were “probably too many” startups raising money during the pandemic.

Stanford continued, “Starting these companies slower is probably healthy.

Investors funded 210 deals in the United States during the second quarter, compared to 196 in Q2 of 2022, showing a slight improvement for larger startups that are getting closer to going public.

However, Stanford pointed out that many of these transactions were actually smaller extension rounds intended to raise money while maintaining higher valuations than if the firms had engaged in larger transactions.

This news comes after weeks of reports describing startups struggling to find new funding in a challenging macroeconomic environment.

A similar situation occurred during the first three months of the year, as reported by PYMNTS: The amount of venture capital raised by American startups fell by 55% between the first quarter of 2022 and the same period this year.

The $20 billion goal was reportedly lowered last month by venture capital fund Insight Partners, which is regarded as a bellwether for tech investing.

One investor told the Financial Times that the sector’s challenges are illustrated by Insight’s funding challenges: The bloodbath is real.

At the same time, Jay Wilson, Investment Director at U.K.-based investment firm AlbionVC, suggested to PYMNTS in an interview last week that the notion that venture capital is the best source of funding for startups may be overstated.

Wilson asserted that “VC money is designed for very specific types of businesses with very specific types of ambition and in reality, it is a very expensive financing method,” adding that “Venture Capital funding is wrong for about 99% of businesses out there.”

According to the principle of outliers and Power Law Returns, which states that an investor generates all of their returns from a small subset of the companies in their portfolio, venture capital (VC) operates on the top end of the capital spectrum in terms of risk-return.

Additionally, Wilson noted that some businesses are unable to quickly create value or develop into the category-leading global companies as anticipated in the VC world because of the high capital costs and double-digit return rates necessary.

Threads, a competitor of Meta on Twitter, launched with 10 million sign-ups in just seven hours. The company’s CEO, Mark Zuckerberg, hopes to surpass Twitter’s 300 million users.

Users can share 500-character posts with links, pictures, and videos that are up to five minutes long using Threads, which was developed by Meta’s Instagram team. Zuckerberg wants Twitter’s 300 million users to be surpassed.

Meta announced that Threads aims to expand Instagram’s functionality to text, providing a creative space for users to express ideas. Users can connect with friends and creators who share their interests, including those they follow on and beyond Instagram.

Meta’s vice president of product, Colton Hayes, revealed that influential Instagrammers have been seeking a text-based app as an alternative to existing platforms.

The launch comes as Twitter faces difficulties, including a significant drop in ad revenue, with a 59% decrease in advertising revenue between April 1 and May 1. The company’s vision is to build a following from zero, rather than starting from scratch.

According to interviews with company employees, the ad sales team is concerned that an increase in hate speech and pornography on Twitter, as well as an increase in advertisements for online gambling and marijuana businesses, may scare away advertisers.

Threads has been released in 100 countries and is accessible from the Google Play Store and the Apple App Store.

However, the European Union member states are reportedly not included in the rollout due to ambiguity surrounding the Digital Markets Act (DMA).

The company “informed us that they have no plans,” according to Graham Doyle, deputy commissioner of Ireland’s Data Protection Commission (DPC), to launch the app in the EU “at the moment.”

According to the DMA, Meta is one of a select group of tech behemoths known as “gatekeepers” because it satisfies certain criteria for revenue, market value, and user count.