Summary:
118 small and midsized U.S. startup investors have raised new funds in 2024, marking a significant drop.
This year is on pace for the fewest new funds in years, reflecting a challenging fundraising environment.
A total of $13.7 billion has been raised for sub-$500 million funds, the lowest tally in years.
Despite the slow pace, there’s a diverse mix of new and follow-on funds in sectors like cleantech and cybersecurity.
Funds raised in down cycles often outperform, with notable successes from Accel and Andreessen Horowitz.
By many measures, the current fundraising environment looks challenging for smaller startup investors. That’s reflected in the tally of new funds.
So far in 2024, just 118 small and midsized U.S. startup investors have raised new funds of $500 million or less, marking a significant drop. This puts this year on pace to deliver by far the fewest new funds in this category in years.
Slow Fundraising Amid Dismal Exits
The slow fundraising comes amid a slow period for exits. Tech IPOs have been dormant for months, and we’re not seeing many M&A deals providing home run returns. Additionally, many older vehicles are still well capitalized, which doesn't help prospective 2024 vintage funds. Overall, venture funding is still far below the 2021 peak.
A recent report from Carta reveals that funds raised in the 2022 vintage year had deployed 43% of committed capital at the 24-month mark, the lowest share of any analyzed vintage. The rate of seed-funded companies graduating to Series A has also declined.
Not Just Fewer Funds; Less Capital Too
This year, a total of $13.7 billion has gone to sub-$500 million funds, looking like the lowest tally in years. The contraction comes as average round sizes have gotten larger, favoring more deep-pocketed funds, especially for huge megarounds.
A Diverse Mix of New Funds
Despite the slow pace, there’s an exciting assortment of new and follow-on funds ramping up this year, particularly in sectors like cleantech, life sciences, and cybersecurity. Examples include:
- The Engine Ventures raised $398 million for their third fund focusing on tough tech problems.
- Clean Energy Ventures closed $305 million for their second fund targeting hardware technologies.
- Ballistic Ventures secured $360 million for cybersecurity investments.
Smaller and First-time Funds
Smaller and first-time funds are also part of the mix:
- Beta Boom raised $14.5 million for seed and pre-seed startups.
- JFF Ventures raised $15 million focusing on education and work.
- Connexa Capital and Create Health Ventures also launched new funds this year.
Historical Perspective
Funds raised in down cycles often outperform. Notably, Accel’s investment in Facebook and Andreessen Horowitz’s first fund in 2009 are examples of success from tough economic times. Whether the newest crop of funds will follow in these footsteps remains to be seen, but optimism remains high among startup investors.
Illustration by Dom Guzman
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