In Q2 2024, the venture ecosystem showed modest signs of improvement, according to an update from Carta.
In Q2 2024, the venture ecosystem exhibited some signs of improvement, but “not a drastic break, from Q1,” the report from Carta revealed.
Based on current data, companies on Carta reportedly “completed 1,287 new funding rounds in the second quarter of 2024, up 4% from Q1 2024.”
VCs invested a total “of $20.9 billion in Q2, up 12% from Q1. Both of these figures will increase as more Q2 data is reported.”
While Q1 experienced a record-high frequency of bridge rounds, there were “fewer bridge rounds in Q2 at the Series A, B, and C stages.”
At the seed stage, the rate of bridge financings “remained flat from Q1 at 41%.”
Carta further noted that the median pre-money valuations “rose at all stages in Q2 except for Series A, where they held steady.”
The report from Carta added that the “rate of down rounds across stages fell from 24.2% to 17.4%. These findings indicate that founders were in better positions to negotiate higher valuations for their companies this quarter.”
The Carta report also mentioned that the year got off “to a slow start in Q1, but Q2’s positive movement along multiple metrics could mean that better days are coming for U.S.-based startups.”
Q2 highlights are as follows:
- Positive signs in venture activity: The number of rounds and total cash raised by startups both increased this quarter. Primary round valuations rose at all stages except for Series A, where they held steady.
- More founder-friendly environment: The rate of down rounds fell to a six-quarter low, and it is less common for deals to include structured terms that favor investors. Bridge rounds also fell for Series A through C.
- Northeastern recovery: Startups based in the Northeast increased their share of VC cash to 25%, at the expense of the West and Midwest census regions. The New York Metro Area brought in $3.6 billion this quarter, a notable increase from Q1.
Key trends include:
Q2 had a boost in both VC deal volume and cash raised
The current data from Q2 2024 “shows a boost in both deal count and total cash raised compared to Q1 2024. Q2’s deal count of 1,287 rounds totaling $20.9 billion is already a marked improvement over Q1. Both figures will increase further as some companies have a lag in reporting their data.”
The Carta repot added that Q2 had the highest amount of VC cash “”invested in any quarter over the past year—and perhaps even longer, as data from Q2 financings continues to finalize in the coming weeks.”
According to the update from Carta, the increase “in deal volume relative to last quarter may indicate that Q1 was the trough and that market activity will stabilize or go up from here.”
Down rounds decreased in Q2 “to a six-quarter low.”
Q1 2024 represented “a five-year high in the prevalence of down rounds, but Q2 reversed that trend.”
This quarter, the rate of down rounds fell “from 24.2% to 17.4%. The falling trend is likely to continue.”
The downturn in VC fundraising is now “more than two years old, which means that going forward, companies that are fundraising are more likely to have raised their most recent round in 2022 or after—in other words, after the period of inflated valuations that occurred in 2020-2021.”
Seed and Series A stages had modest gains in Q2.
The Carta report further noted that seed deal count “in Q2 is about even with Q1’s total, but Q2 will likely post a slight gain over Q1 after accounting for data lags. At the Series A stage, the data already shows that Q2 fared better than the previous quarter.”
The Carta report pointed out that the “rebound in Q2 may represent a turning point from Q1, which had represented the lowest quarterly deal counts for both seed and Series A since early 2019.”
Total cash raised for both stages “increased modestly in Q2.”
At the Series A stage, Q1’s total cash raised “was the lowest value recorded in the past five years.”
The Carta report further revealed that this quarter’s 16% increase “still ranks Q2 among the lowest-earning quarters for Series A, but may signal the beginning of an upward trend.”