Venture capital money is flowing into ecommerce businesses more slowly these days, says new research from Pitchbook.com.

But the areas that are getting more funding are new applications and services aimed at generating more revenue in a tougher economy.

For example, total venture capital spending on the ecommerce sector totaled about $3.4 billion in the first quarter, down about 72% from the first quarter of 2022, says Pitchbook. “Merchants face continued headwinds via intense competition, rising customer acquisition costs, lingering macroeconomic uncertainty, and a reversion to preCOVID-19 pandemic shopping trends,” Pitchbook says.

But the sectors that did raise funding in the first quarter, including BNPL (buy now, pay later) and credit ($2.0 billion), fraud prevention ($351.9 million), ecommerce as a service ($157.3 million), fulfillment and delivery ($118.8 million), and storefronts and headless APIs ($102.9 million), were seen by investors as emerging applications and services that would deliver a return on investment. “Our conversations with investors indicate that merchants are placing greater scrutiny on software purchases and corresponding return on investment (ROI).” Pitchbook says. “Additionally, in a crowded ecosystem with intense competition, incumbent merchants like Amazon, Instacart, or Gopuff continue to lean into advertising networks to augment existing revenue streams.”

Investors, which Pitchbook says completed 83 deals in the first three months of the year, preferred start-up deals over established companies seeking more funding. Early-stage and venture-growth deals both declined, while angel and seed, and late-stage deals all increased,” Pitchbook says. “This decline is closely coupled with rising interest rates, which decreased merger and acquisition activity, and a broad-spectrum closure in the initial public offering (IPO) window.