North American Startup Investment Perked Up A Bit In Q1

After many months of tightening their purse strings, North American startup investors loosened them up a bit in the first quarter.

Altogether, venture funding in American and Canadian companies totaled $35.2 billion in Q1 of 2024, per Crunchbase data. That’s a gain of 14% from Q4, which was the slowest quarter in years.

But while funding was up sequentially, investment is still down year over year. Late-stage funding in particular remains well below year-ago levels, while early stage has held up better.

For perspective, we compared funding totals, color-coded by stage, over the past 13 quarters below.

While spending rose sequentially in Q1, deal volume did not. Per Crunchbase data, investors participated in 2,435 known rounds at all stages in the course of the quarter. That’s a decline of 8% from the prior quarter and 34% from year-ago levels, as charted below.

On the exit front, meanwhile, Q1 brought some renewed excitement to the moribund IPO market with well-received debuts of Reddit and Astera Labs. We also saw a few good-sized acquisitions.

Below we take a look at both investment and exit activity in more detail, breaking down totals by stage, looking at significant rounds, and tallying up largest M&A and public market exits.

Table of contents

Late stage and technology growth

We’ll start with late-stage dealmaking, which still attracts more money than any other stage, even at the current, somewhat depressed levels.

Altogether, $19 billion went into late-stage and technology growth rounds in North America in Q1, per Crunchbase data. That’s a bit of an uptick from the prior quarter, but still well below year-ago levels, as shown in the chart below.

Deal counts also picked up a bit sequentially, with 265 late-stage and growth rounds reported for North American companies in Q1.

The totals got a boost from some extra-large financings for a handful of companies, including:

• San Francisco-based Generate Capital, a green infrastructure investor and operator, secured $1.5 billion in a January financing;
• New York-based Wonder, a startup that offers takeout and delivery from several restaurants cooked in a single kitchen, picked up $700 million in a March financing;
• San Francisco-based Lambda, a cloud-based GPU company, raised a $320 million Series C in February; and
• South San Francisco-based Alumis, a startup developing oral therapies for patients with immune-mediated diseases, landed $259 million in a March Series C.

But while jumbo-sized rounds did close over the course of the quarter, such deals remain far rarer than they were during the 2021 peak. Part of the reason is the highest-spending investors back then — SoftBank Vision Fund and Tiger Global Management — are much less active now.

Early stage

Activity in Q1 was pretty robust at early stage, boosted by big rounds for companies focused on biotech, artificial intelligence and climate tech.

Total early-stage funding for the just-ended quarter came in at $13.2 billion — surpassing the prior two quarters. Round counts ticked down a bit, as average investment size rose.

For perspective, we charted funding and round totals for the past five quarters below.

Investors also backed some unusually large rounds at Series A and Series B. Standouts included:

• Sunnyvale, California-based Figure, a developer of AI-enabled humanoid robots, snagged $675 million in Series B funding;
• San Diego-based Mirador Therapeutics, a startup focused on precision medicine for chronic inflammation and fibrotic disease, closed on $400 million in Series A funding; and
• Denver-based Koloma, a startup developing technology to extract naturally occurring hydrogen from underground deposits, dug up $246 million in Series B funding.

Seed stage

Seed investment saw the sharpest quarterly decline of any stage, according to preliminary Crunchbase data.

For Q1, a total of $3 billion went into reported seed, pre-seed and angel rounds. That’s a decline of 14% from the prior quarter and a drop of 23% from year-ago levels.

Round counts fell too. For the full picture, we chart out total funding and the number of deals for the past five quarters below.

Because some seed rounds are reported weeks or months after they close, we expect the Q1 total to rise a bit over time. However, it’s unlikely this will change the overall narrative of a down quarter.

Although most seed deals are in the single-digit millions, we did see a few extra-large financings. One of the largest from Q1 was for Alys Pharmaceuticals, an immuno-dermatology startup that launched with $100 million in initial funding. Other big rounds went to Antithesis, a provider of AI-enabled quality assurance software that picked up $47 million, and Blue Laser Fusion, which raised $37.5 million to work on laser fusion technology.

Exits

Of course, venture investors don’t only put money into startups. They expect to get returns when those companies mature and go public or get acquired.

As exit environments go, Q1 of 2024 wasn’t especially terrible. The IPO market opened up for a couple of splashy debuts, and acquirers wrote a few big checks, as detailed below.

IPOs

The IPO market, which has been very sluggish for months, picked up in March with the much-anticipated debuts of Reddit and Astera Labs.

Santa Clara, California-based Astera, a developer of data center connectivity technology with use cases in generative AI, made its splashy debut first on March 20. Shares soared in initial trading and continued to rise in the following days. Although off its peak, Astera recently had a market cap of more than $11 billion.

San Francisco-based Reddit, known for its lively online discussion forums, began trading two days after Astera. After surging in the early days of trading, shares sank a bit. Nonetheless, Reddit recently managed to maintain a market cap around $7.5 billion.

In addition to the two headlines, we also saw some smaller offerings by venture-backed companies including Kyverna Therapeutics, ArriVent Biopharma and FibroBiologics, which went public via direct listing.

M&A

Acquirers also announced agreements to buy a number of venture-backed companies. Although in most cases prices were not disclosed, a few were made public. Of these, the largest included:

The big picture

With Q1 now in the rearview mirror, it’s timely to consider what broad takeaways we can find in the data.

All in all, we’d say it wasn’t the most rollicking quarter. But there were a few indicators to bolster optimists’ case for a recovering startup investment climate.

For one, public investors showed there is appetite for large tech IPOs. And while we’ve seen better quarters for M&A, we saw that acquirers are still willing to write big checks.

Seeing early-stage investment continuing to rise over the course of several quarters also looks encouraging. Today’s hot early-stage companies, the hope is, will become tomorrow’s sought-after IPOs.

That said, the data wasn’t strong enough to support the idea that startup investment is back in a big way. Investment is still far, far below the peak. Getting back there, if it happens at all, will require a long, uphill climb.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of April 3, 2024.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

We have made a change to how we include corporate funding rounds in our reporting as of January 2023. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round.

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Illustration: Dom Guzman