Venture Trends from Summer 2024
As we write this with the official Summer 2024 now in the books and the winds of fall looming on the horizon, we find ourselves reflecting on the past few months. As we prepare for the final sprint toward the end of the year, it’s a great time to take a thoughtful look back and carefully review the emerging trends that we may apply to guide us in the upcoming months ahead.
Uptick in Q2 in VC Funding
In Q2, global venture funding hit $79 billion, the highest in five quarters, mainly due to big investments of $100 million or more in later-stage AI companies.
But of particular interest was the notable growth in Seed Stage financing, which saw a significantly greater number of investments. This growth trend reflected the understanding that this specific stage is where many savvy investors found the potential for delivering the highest level of returns based on the performance of prior vintages of investments.
AI Uplift and Subsequent Headwinds
It was observed that the majority of the uplift in funding was driven by AI as funding in Q2 doubled from prior quarters with money invested. Although the number of deals slightly declined due to the massive capital outlays required for each participating start-up.
In Q3, headwinds emerged for private AI companies as expectations lowered given a number of factors from the high capital requirement to positions taken by leading incumbents including Google, Microsoft, and Meta investing heavily and deploying business models reducing potential outcomes for start-up participants.
Going Flat or Down
In an August 9, 2024 report by Pitchbook the percentage of flat and down rounds for VC-based companies hit a decade-high in the first-half of 2024 with 28.4% experiencing going flat or down.
Investors are choosing leading startups with clear profit paths instead of those focused only on growth. This trend may lead to further declines in startup valuations based on past history.
Where We Go Now and Opportunities for Startups
As we look at the crystal ball the question is where do we go now?
There are a number of distinct camps to carefully consider, especially given the current state of the markets and the wider uncertainties tied to the forthcoming US elections and ongoing geo-political concerns that seem to be affecting global stability.
But what appears to be winning is the theme of bootstrapping where possible and understanding that the best way to optimize your potential to attract new capital should you need it is to manage your cash flows and lengthen the runway you already have today.
This is precisely where a seasoned and experienced Fractional CFO can play a crucial role in helping you identify and effectively deploy a variety of strategies and activities. These tailored approaches will set you on the correct path towards achieving your financial goals and long-term success.
Contact us to learn more about how Anabatec or one of our partners could help you.