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Have We Reached the End of Venture Capital?
Funding for early-stage startups is slipping away as angels lose enthusiasm and VC money goes big
Is venture capital dying? That may seem like a strange question when this year so far 100 baby unicorns have been born compared to 100 for all of 2024.(1)
Funding for startups in 2024 was $314 billion, up slightly from $304B the previous year.(2) But 19% of that money went into billion dollar rounds. 48% went into AI.(3) If you’re building a giant AI model and need $50 billion, there’s no shortage of cash for you.
The massive checks being thrown at a small number of AI unicorns by a tiny number of huge funds is creating a false sense that venture capital is doing fine. But for everyone else, both founders and investors, times are tough now.
What About Early Stage?
I’m more concerned with the challenges of pre-seed startup founders, looking for that first modest fillip of cash. And what I’m seeing of the angel and micro-VC world isn’t encouraging.
Engagement in my angel groups is down markedly this year. The number of members has declined, and the scuttlebutt is that most angel groups are struggling to maintain membership and engagement.
Our annual angel funds that make pooled investments is down by 2/3 this year compared to 2022, and down by half from last year. Enthusiasm for angel investing seems to be ebbing away.
Is this the beginning of the end of angel investing? The data appears to say otherwise.
Carta publishes amazingly helpful reports. Their 2024 State of Pre-Seed aggregates data from 9,000 startups using Carta. How did pre-seed startups fare last year? Not bad at all, it seems.
In 2024, there were 25,234 pre-seed investments raising $4.05 billion. That’s a small 6% drop compared to 26,985 investments in 2023, raising a nearly identical $4.01B. 2022 was remarkably similar as well. The past 3 years are stable, and a big gain over 2021. The big drop in the last quarter of…
