During the rise and fall of an “unprecedented” bull market across 2021 and 2022, founders and investors had to navigate a wild ride of ups and downs, the team at Carta noted.
That volatility diminished in 2023. The startup ecosystem trundled “along at a slow but steady pace, with activity near recent lows,” according to an update from Carta.
This new equilibrium involves fewer deals and fewer dollars. Total venture deal count on Carta was down 24% year over year in 2023, “while cash raised by startups fell by 50%. But the fundraising that took place in 2023 proceeded at a steady pace.”
Carta further noted that during each quarter, startups closed “somewhere between 1,209 and 1,574 rounds and brought in between $12.8 billion and $20.3 billion in total capital.”
Several facets of the fundraising scene “shifted in 2023 in ways that will continue to impact founders and investors in 2024.”
Carta also mentioned that startups were “forced to extend their runways longer than ever. Bridge rounds boomed in popularity. Series A valuations experienced a second-half surge. But the sort of seismic movements that shaped the venture landscape in recent years were fewer and farther between.”
Q4 highlights shared by Carta are as follows:
- Down rounds remained elevated: The rate of down rounds across all venture stages landed somewhere between 19% and 20% every quarter last year, including 19.6% of all investments in Q4. These were the four highest quarterly down-round rates since the start of 2018.
- Seed activity slumped: Startups closed just 462 seed investments in Q4, the smallest total since Q1 2018. Year over year, seed deal count is down 27%.
- Late-stage valuations took a leap: In Q4 2023, the median pre-money valuation increased by 71% at Series D and by 46% at Series E+ over Q3 medians. These late stages had felt the brunt of the venture slowdown, with valuations plummeting in prior quarters.
For now, Q4 was the slowest quarter of the year for venture dealmaking, with 1,209 new investments. That would be the lowest quarterly total since Q1 2019. However, the total number of Q4 rounds “will likely increase in the months to come as companies report additional transactions.”
Still, the comparison to 2019 may be a useful one: That year, there were 5,799 transactions logged on Carta, “compared to 2023’s current count of 5,409.”
In terms of both the number of deals and “the amount of capital raised, the data from 2023 looks much more similar to the pre-pandemic years of 2018 and 2019 than any year from the 2020s.”
In Q4, some 45% of all fundings raised by Series A startups “were bridge rounds, the highest quarterly rate for any stage so far this decade.”
In Q4, the median time between a company’s Series A and its Series B “extended to 784 days (about two years and two months), the longest interval on record.”
In general, the time between rounds has “been trending up in recent years at Series A, Series B, and Series C. For founders, ensuring your startup has enough runway has never been more important.”
