What we learned about venture capital funding during the 2008 financial crisis and the pandemic as markets face further turmoil


Editor’s note: This is the first part of a two-part series examining lessons learned from the financial crisis and the pandemic recovery of venture capital. Read part 2 here.

Former US President Harry S. Truman once said, “There is nothing new in the world except the history you don’t know.

The same goes for funding cycles. As investors and founders continue to recover from the truly incredible circumstances triggered in 2020 by the global COVID-19 pandemic, one cannot help but look back on the dramatic impact of the 2008 financial crisis.

The effects of the financial crisis and the pandemic have differed considerably, as we have visualized here through the data; the financial crisis has dampened funding, while the pandemic has been an inflection point.

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Despite the decrease in funding following the financial crisis, business creation and start-up funding continued to grow due to underlying technology trends. The emergence of seeds has led to a whole new wave of innovation.

As the business world enters another period of turmoil in 2022, let’s take a look at what we can learn from these two recent periods of economic upheaval.

The 2008 financial crisis

Undoubtedly, Crunchbase data shows that the 2008 financial crisis had a significant impact on private company funding, with the downturn beginning towards the end of that year.

Capital Sequoia sounded the alarm with his “RIP Good Times” presentation in October 2008, warning his portfolio companies to buckle up and manage costs to increase their track as funding markets were no longer intact.

A huge funding shortfall in 2009 ensued. It was not until 2011 that funding returned to 2007 levels.

Series A, B and C funding amounts fell 40% to 47% in 2009 compared to 2008 funding, according to data from Crunchbase.

Unique businesses funded by Series A to Series C funding also declined in 2009 by between 26% and 28% year-over-year.

It took a few years for the 2007 and 2008 funding amounts and accounts to be met or exceeded again.

Seed Funding Turns into Institutional Class

Yet throughout the trough of 2008-2009, a whole new stage of funding was taking hold alongside the growth of cloud and mobile technologies.

Seeds emerged as an institutional asset class during the Great Recession, with investments in younger startups no longer left to friends and family or the occasional angel.

And seed investments showed continued growth after 2008, according to Crunchbase data, reaching nearly 16,000 companies that raised seed money at this stage in 2014, up from less than 1,000 companies eight years earlier in 2006.

The 2008 financial crisis slowed early and late-stage business financing, but not seed financing or new business creation. New businesses were created and funded throughout this period at an increasing rate despite the slowdown in post-seed funding.

This turns out to be the most significant trend of the financial crisis.

What we have seen during the pandemic

As we entered the pandemic in the first quarter of 2020, we saw some early signs of a slowdown, according to data from Crunchbase. Sequoia Capital again issued a warningthis time calling the nascent pandemic a “black swan” event.

But the expected slowdown did not materialize in the final quarters of 2020, and funding was broadly in the 5% range for Series A and B. And Series C, in fact, continued to grow by around 18% in 2020 compared to 2019.

Then in 2021, funding was canceled for races with more than 93% growth in Series A and 132% in Series C compared to 2020.

What the pandemic has highlighted is a trend that has been quietly brewing over the past decade.

Rather than a story of funding cycles with ups and downs, we have witnessed a paradigm shift: a complete overhaul of the industry through technological innovation.

All areas of our society – from entertainment to transportation, manufacturing, commerce, health care, energy and finance – are transforming. What this means for society and culture is being negotiated on many levels, and the process will not be equal. Legacy companies are transforming, as are the very investors who fund tech startups.

It turns out that the technology trends that led to the rise of seed-stage companies and the force that recreated industries were also the catalyst that led more than 30,000 enterprise-backed startups to receive a financing in 2021, compared to 3,500 companies in 2006.

Last year was by far a record for global venture capital, with $669 billion invested in startups around the world. This inflection point was built on more than two decades of innovation.

As we head into the second quarter of 2022 with concerns about potentially overvalued companies, pandemic-era buying trends that may fade, supply chain issues, inflation and a slowdown markets, there are fears that we are headed for another downturn in private financing.

But funds raised by venture capital and private equity firms in 2022 have yet to slow.

And if funding and valuations dip in 2022, companies should be hanging on for a few bumps, but the seismic shifts wrought by the last decade in venture capital are here to stay.


The data in this report comes directly from Crunchbase and is based on reported data. Data reported is as of March 25, 2022.

Note that data lags are most pronounced in the early stages of venture capital activity, with seed funding amounts increasing significantly after the end of a quarter/year.

All financing values ​​are given in US dollars, unless otherwise indicated. Crunchbase converts foreign currency to US dollars at the spot rate in effect as of the date funding rounds, acquisitions, IPOs, and other financial events are reported. Even though these events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historical spot price.

Glossary of Funding Terms

Seed and Angel consists of Seed, Pre-Seed, and Angel towers. Crunchbase also includes VC rounds of unknown series, equity crowdfunding, and convertible notes at $3 million (USD or converted USD equivalent) or less.

Further reading:

Looking back: With the current market downturn, what have investors learned from other downturns and what are they worried about now?

Drawing: Dom Guzman

Stay up to date with recent funding rounds, acquisitions and more with the Crunchbase Daily.


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