VC Fundraising Market Remained Slow in Q1 2024 But Valuations Held Steady – Carta Private Markets Report

Carta has released their State of Private Markets: Q1 2024 report.

Carta notes that the venture capital fundraising market “remained slow in Q1 2024, but valuations held steady or climbed at almost every stage.”

Carta also mentions that the startup fundraising market “got off to a cautious start in 2024.”

At current count, companies on Carta has “closed 1,064 new funding rounds during the first quarter of the year, down 29% compared with the prior quarter.”

The decline was sharpest at the early stages of “the venture lifecycle: Deal count fell by 33% at the seed stage in Q1 and 36% at Series A.”

Instead of new primary funding events, many companies “opted to raise bridge rounds. At both seed and Series A, more than 40% of all financings in Q1 were bridge rounds. Series B wasn’t far behind, at 38%.”

VCs were still willing to “spend big on certain deals. Despite the decrease in round count, total cash invested increased slightly in Q1, reaching $16.3 billion. But when it came to negotiating their valuations, many startups had to settle: 23% of all new rounds in Q1 were down rounds, the highest rate in more than five years.”

After experiencing a pandemic-era surge and “subsequent correction, the venture market settled into a quieter place in 2023. So far, that relative tranquility has continued into 2024.”

Some of the Q1 highlights, as shared by Carta are:

VCs look to the West: Startups based “in the West census region captured 62% of all venture capital raised by companies on Carta in Q1, the highest quarterly figure since Q1 2019.”

The Northeast, South, and Midwest “all saw their market share decline.”

The Series C market bounces back: Series C startups “raised $4.6 billion in new capital in Q1, a 130% increase from the previous quarter.”

The median primary Series C valuation “was $195.7 million, up 48% from the prior quarter.”

Layoffs still linger: Companies on Carta “laid off more than 28,000 employees in Q1. But job cuts have grown less frequent since January, with March seeing the fewest monthly layoffs in nearly two years.”

Other Key trends:

Q1 was another quarter of tepid VC investment

According to the Carta report, the current Q1 figures “of 1,064 total rounds and $16.3 billion in cash raised will both increase in the weeks to come, as companies continue to report transactions from the quarter.”

With those projected increases, the final data for Q1 “will likely look quite similar to fundraising numbers from each of the past few quarters.”

Those quarterly fundraising numbers “from 2023 ended up looking fairly similar to 2018, 2019, and the first half of 2020. In terms of numbers of deals and cash raised, it’s looking more and more like the pandemic bull market will go down as an anomalous stretch in what has otherwise been a fairly steady market. Q1 had the highest share of down rounds in the last 5 years.”

After apparently reaching a plateau during 2023, “the rate of down rounds experienced another notable increase during Q1 2024, jumping to 23%.”

The median time between startup rounds “is roughly two to three years, depending on the stage.”

This timeline means that many companies “raising new funding in Q1 would have last raised funding sometime in 2021, when valuations were soaring across the venture landscape.”

Considering how valuations have “declined in the time since, it makes sense that down rounds are still prevalent.”

West region saw over 50 percent of investment last 12 months

Companies in the West census region “combined to bring in 53.3% of all capital raised by startups on Carta from Q2 2023 through Q1 2024, with California accounting for nearly 45% of that cash. Massachusetts ranked second among the states with 12.71% of all capital raised, while New York claimed 10.31%.”

In terms of VC activity, the West region is “centered around California.”

The Northeast revolves around Massachusetts and New York. The South has “two smaller hubs, in Texas (4.67%) and Florida (3.99%). The Midwest, though, is without a real standard-bearer: Illinois led the way in terms of cash raised over the past 12 months, at just 1.68%. West took significant share in Q1 2024.”

The West (and specifically California) “has always been the center of gravity for the U.S. venture capital industry. During Q1, the region’s gravitational force seems to have gotten even stronger. Startups based in the West raised 62% of all total capital invested on Carta in Q1, its highest quarterly figure since Q1 2019.”

As a result, the other three census regions “saw their market shares decline in Q1—in some cases significantly.”

The proportion of all VC “raised by startups raised in the South fell to 12% in Q1, down from 17% the prior quarter and from 23% a year ago. And the Midwest’s share of cash raised fell from 7% down to 4%.”

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