Dive Brief:
- Despite a slight uptick during the fourth quarter, aggregate venture capital e-commerce deal activity in 2023 dropped significantly year over year, per a Q4 2023 E-Commerce Report by markets research company PitchBook.
- Though quarterly trends improved, deal counts in Q4 dropped 47.5% year over year, while deal value was down 30.4%, per the report.
- Several notable deals closed in Q4, including Leap’s $22.3 million funding round. The company aims to help DTC brands establish a retail footprint.
Dive Insight:
The industry appears to be coming off the highs experienced during the early pandemic aftermath with deal count and value declining again in 2023 after falling in 2022.
For all of 2023, e-commerce venture capital deal count dropped 52.6% year over year, to 461, and deal value fell 72%, to $8.9 billion, further indicating a major drop-off from the elevated activity of 2020 to 2022, when the DTC space exploded amid stay-at-home orders.
“The COVID-19 lockdown offered the perfect storm of low interest rates and a bevy of consumers stuck inside with no option other than to shop online, but these conditions are now entirely behind the e-commerce vertical,” the report reads. “Consequently, the sector is unlikely to return to the levels of funding seen in 2020 to 2022 for some time. Exits remain challenged with the IPO window largely closed.”
Initial public offerings in the DTC space were few and far between in 2023 with a handful of exceptions. Footwear brand Birkenstock opened on the New York Stock Exchange in October at $46 per share. And Oddity, the owner of Il Makiage and SpoiledChild, launched its IPO last July.
While online shopping continues to be an important platform for consumers, there is a divide between retailers and consumers regarding their e-commerce experiences. Some 80% of brands believe shoppers are impressed by their online experiences, while fewer than 50% of consumers feel that way, according to research from Deloitte cited in the PitchBook report. Among the points of disagreement were inventory awareness, ease of returns, delivery updates and accurate search results.
