Fundraising by startups remains well below its 2020 and 2021 heydays. However, there are signs of improvement. Compared to the same period in 2023, fundraising in the first half of 2024 grew by 5%, and this figure is likely higher due to a lag in reporting.
So, What Does This Mean?
In short, it’s still unclear. How this year will compare to 2023 is uncertain, with the next few months likely to prove pivotal not only for the rest of the year but for those to come. The Fed has decisions to make on interest rates, a new U.S. president will be elected, and geopolitical uncertainty continues.
While the macroeconomic outcome is uncertain, there are steps founders can take to best position themselves. At Tau, we advise all our entrepreneurs to maintain at least 6 months of runway and expect that raising a new round will take at least 3 months. If you’re unsure of your ability to raise your next round, explore other options, including M&A and venture debt, to the extent available. Keep in mind that acquisitions are typically the result of long-standing conversations spanning multiple years. Engaging with potential buyers doesn’t prevent you from raising a successful round; on the contrary, understanding all your options increases your bargaining power and the likelihood of a better outcome. Finally, if you need to consider a down round, take it as an opportunity to clean up your cap table and position your company for future success. Fortunately, according to Carta, the prevalence of down rounds has started to decrease, likely due to fewer denominators being burdened by the lofty valuations of 2020 and 2021.
