What’s happening with seed-stage investments in February 2024? Well, it’s not all that bad.
Recently, I was gathering statistics for you on the venture market in different regions. And the situation was somewhat bleak — a decline, decay, and poverty everywhere. But we must look for the positive. And indeed, something positive was found. Crunchbase released two notes about seed-stage investments in the USA (first and second). And things aren’t so bad there. I suspect that the trend in the US market is more or less relevant for other regions, so it can serve as a good reference point.
Firstly, I was surprised that in 2022 the volume of seed-stage investments increased compared to 2021. Despite everyone talking about a venture winter. Apparently, they talked, but still threw money into budding startups.
Secondly, the market dipped in 2023. That’s a fact. But the volume is still higher than in 2020. So, if there hadn’t been 2021, when startups suddenly got showered with investments, maybe there wouldn’t have been a fall. Everything would have smoothly reached this volume. And the average round size even turned out to be higher than in 2021.
In general, life is possible for budding startups. But not without problems, of course. For example, you’ll have to come to terms with the fallen valuations. Unfortunately, Crunchbase doesn’t have statistics on valuations, but investors say they’ve dropped.
Another negative point is that the journey from a seed round to a Series A round now takes more time. On average, about 28 months. In 2020 it was 24 months. Startups from the top 25% will manage to make this journey in 12 months. But it’s hard to predict whether you’ll be in those 25% or not. So it’s worth taking a more rational approach to spending.
Moreover, the volume is higher than in 2020, but the number of deals has fallen to the level of 2016. That means the competition for rounds has become higher than in recent years. Fewer projects are getting funded. So you’ll have to prove that you’re the right ones.
But overall, such statistics inspire optimism. At least, they do for me. Now, new startups will grow, and the movement will start again. Probably.
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