The drop in startup investments over economic slowdown is over. Startups have been gaining all-time high valuations in the first 6 months of 2024.
2023 was a tough year for startups, especially venture-backed ones. The second half of 2023 was tougher for seed-funded startups trying to conduct the next fundraising rounds, even at lower valuations. However, based on recent stats shared by leading investment houses, the global economic downturn looks to have subsided. According to PitchBook data, seed-funded companies’ valuations dropped in 2023 but recovered quickly in the first 6 months of 2024.
VC firms are getting aggressive on the investment risks they are willing to take, especially in median early and late-stage fundraising rounds. This move comes as investors shift business priorities from preservation and sustenance to risk and reward. IVP general partner Tom Loverro, a leading investment entity, says that the fundraising winter for startups has been over for over 6 months.
Investors are willing to pay against higher valuations as they prioritize innovation acquisition in US-based startups, some of which have reached all-time high deals. The turn of the situation is evident in the Fintech ecosystem. U.K. challenger bank Monzo achieved a valuation of over $5 billion in March 2024, nearly 15% more than its previous round in 2022.
Startups have played a major role in reversing the valuation drop trend. Observing the layoffs in big tech companies, many startups cut down on costs before it was too late and successfully treaded through the slow economic phase. Many of these have tapped innovations, especially in the AI industry.
“The capital markets are coming back slowly, and if you can achieve real growth and fundamentals, there is going to be capital for [your startup],” said Samir Kaji, founder of Allocate, a startup that allows family offices and wealth advisers invest in VC funds. However, Pitchbook’s data may be inaccurate as it only shows the startup companies that successfully raised funding. Many startup companies that failed to raise funds may not have been included in the study, indicating highly optimistic inaccuracy. The second quarter will strengthen the data as more independent researchers and investment houses get in on the action.
