Welcome to The TechCrunch Exchange, a weekly newsletter that dives into the world of startups and markets. We’re inspired by the daily TechCrunch+ column and are excited to bring you the latest insights every Saturday.
A Tough H1
It’s always challenging to predict how a startup category will fare in a downturn. Just a few months ago, I would have expected cybersecurity to be relatively recession-proof, just like data observability. However, I didn’t anticipate generative AI and animal agriculture being as resilient as they are.
Cybersecurity: The Recession-Proof Sector?
Numbers are out on investment into cybersecurity last quarter, and the results are not good. According to Crunchbase, cybersecurity startups only raised $1.6 billion in venture funding in the second quarter of the year. This represents a 63% quarter-on-quarter decline and is the lowest amount this sector has raised in any given quarter since Q4 2019.
For comparison, cybersecurity venture funding reached $4.3 billion in the second quarter of 2022, which was more than double last quarter’s numbers but already almost half less than its $8.4 billion Q4 2021 peak. Deal volume is also down, with 312 deals announced over the first six months of this year compared to 507 during the same period the previous year.
"While the numbers are not dissimilar to the venture capital world in general right now," Crunchbase noted, "it is somewhat stunning that a sector always thought to be ‘recession proof’ or able to hold strong in a downturn has shifted so much."
Cybersecurity was long thought to be relatively immune from downturns because cybercriminals don’t care about budget cuts. In fact, malicious actors had a pretty busy 2022, making cybersecurity spending a priority for enterprises.
Solving Problems is Key
However, not all sectors are feeling the pinch of the economic downturn. Join us at TechCrunch Disrupt in San Francisco on September 19-21 to hear from VC leaders and startups that are innovating and solving real-world problems.
Generative AI: The Resilient Sector?
On the other hand, generative AI is showing signs of resilience. According to recent reports, Chinese AI company MiniMax has released new models that claim to be competitive with the industry’s best. This news comes on the heels of a 216% spike in US users learning Chinese on Duolingo amid the TikTok ban and move to Red.
Animal Agriculture: The Unexpected Bright Spot
Another unexpected bright spot is animal agriculture, specifically Colossal Biosciences’ recent $200 million raise at a $10.2 billion valuation to bring back woolly mammoths. This news has sparked interest in the industry, with many experts predicting that synthetic biology will be a key driver of innovation in the coming years.
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