Raising seed capital? It’s hard.
The past two years have tested founders more than ever. Yet, amidst these challenges, the first quarter of 2024 brought some unexpected good news. While deal counts have dropped significantly, the valuation of Seed to Series B startups has shown surprising resilience. This article explores how stable valuations amidst declining deal counts reflect the enduring strength and strategic acumen of top founders.
Seed to Series B: A Study in Resilience
Carta’s Q1 2024 report illustrates a notable discrepancy between the number of deals and their valuations at the early stages of funding. At the seed stage, while the median pre-money valuation dipped by a mere 0.2% compared to Q1 2022, effectively bouncing back from the decline over the previous quarters, deal count plummeted by 43.5%. This trend persists through Series A and Series B, where valuations have remained relatively stable despite significant reductions in deal counts.
Digging into the numbers, Pitchbook’s Q1 2024 Report shows that early stage pre-money valuations have jumped up in 2024 compared to previous years. Pre-seed and seed-stage deals continue to show heightened valuations.
Companies tracked by Carta reported closing 1,064 new funding rounds in Q1 2024, marking a 29% decline from the previous quarter. The decline was particularly pronounced at the seed stage, where deal count fell by 33% to 414, and at Series A, where it decreased by 36% to 313. Interestingly, more than 40% of all financings at these stages were bridge rounds, indicating a shift in funding strategies amidst tightening conditions.
Despite the rebounding prices and the significant decline in deal counts, the resilience demonstrated in early-stage valuations is a testament to the strength and strategic foresight of exceptional founders. While the path to securing seed capital in Q1 2024 was undeniably tough, the data from Carta shows that those capable of navigating these turbulent times not only managed to secure funding, but also did so on surprisingly favorable terms. This underscores a crucial point: even in a contracting market, the potential for success remains high for founders who can adapt and persevere. Successful founders can continue to fundraise through delivering strong financial and operational KPIs, building strong teams with relevant experience, and focusing on developing a clear and compelling company narrative.
Thus, while the journey is hard, the rewards for resilience and strategic adaptability continue to be substantial.
Tau Ventures is an AI-first early stage fund in healthcare, enterprise, and automation.
