Startups have been up and down in terms of funding in 2024. AI has been the leader in almost everything and CPGs have raised less and less. However, as we push further into the year, there’s some optimism for U.S. startups. The latest data from Q2 2024 shows promising trends, signaling what some rumor to be a potential turnaround after a challenging period. Below, we’ll walk through some of the key insights presented by the State of Private Markets report, however, we encourage you to look through the full report yourself and review the 25+ charts and in-depth analysis here.
There’s a light at the end of the tunnel for those traveling to fundraising. In Q2 2024, there was a slight increase in total fundraising, rising from $18.7Bn in Q1 to $20.9Bn across all U.S. startups. While this isn’t a massive jump – it’s a steady improvement. Many founders and investors should take this as the welcome for change to come.
One of the most encouraging, or arguably the most encouraging signal, from Q2 is the decrease in the percentage of down rounds. These rounds dropped from 24% in Q1 to 17% in Q2, significantly showing a reversal of a troubling trend that had been climbing since mid-2022. More startups are raising capital at a higher or equal valuation, according to the data. The takeaway should be that market confidence is up.
There was a decrease in the percentage of bridge rounds except for in the seed round. More capital is being allocated to new companies rather than pushing more resources to existing ones. For emerging startups, they should take this as the hint to continue pushing through. Afterall, fundraising is a numbers game. However, on the flip end, the data shows some challenges for those looking and working for bridge financing.
Unlike typical trends showing Silicon Valley and NYC being the powerhouses of fundraising markets, there is strong growth in states such as Texas, Florida, Colorado, and Washington. New startup/innovation hubs are coming, and more startup founders should and can have confidence building out their dreams.
Dilution per round for fundraising has decreased in Q2 as well, which is a great sign for founders. For those able to raise funds, deals are favorable and continue to be just that. Founders are holding on to more equity in their companies which will allow them to play a long-term game of chess.
Valuations have been strong, especially median valuations, for the Seed and Series A stages, with pre-money valuations at $15Mn and $40Mn, respectively. These figures indicate strong investor interest in early-stage startups, a critical component of a healthy startup ecosystem.
There has been a percentage of deals with a liquidation preference over 1x fell in Q2, along with a decline in deals with participating preferred stock. Changes such as this suggest a shift toward more founder-friendly terms, potentially easing some of the pressures for startups to get to an exit.
Q2 2024 isn’t the same as the startup world was in 2021. However, it’s an improvement from 2023. The data shown and mentioned suggests a stabilizing environment where startup founders can navigate with cautious optimism, capitalizing on favorable trends while also working through the risks associated with raising a round.
If you’re a founder heading into Q3, you should be happy – maybe even dancing right now – as the outlook for startups is strong. While we’re not a full-blown boom shown in 2021, the signs of recovery are definitely there. Founders who can push through the environment strategically have opportunities to secure favorable deals and position themselves for a solid future within their startup. For a deeper dive into these trends, be sure to check out the full State of Private Markets report.