State of Private Markets: Q2 2024 | Carta

State of Private Markets: Q2 2024

Author: Hamza Shad
Read time: 11 minutes
Published date: August 8, 2024

In Q2 2024, the venture ecosystem showed modest signs of improvement.

Executive summary

In Q2 2024, the venture ecosystem showed modest signs of improvement, but not a drastic break, from Q1.

Based on current data, companies on Carta completed 1,287 new funding rounds in the second quarter of 2024, up 4% from Q1 2024. VCs invested a total of $20.9 billion in Q2, up 12% from Q1. Both of these figures will increase as more Q2 data is reported.

While Q1 experienced a record-high frequency of bridge rounds, there were fewer bridge rounds in Q2 at the Series A, B, and C stages. At the seed stage, the rate of bridge financings remained flat from Q1 at 41%.

Median pre-money valuations rose at all stages in Q2 except for Series A, where they held steady. The rate of down rounds across stages fell from 24.2% to 17.4%. These findings indicate that founders were in better positions to negotiate higher valuations for their companies this quarter.

The year got off to a slow start in Q1, but Q2’s positive movement along multiple metrics could mean that better days are coming for U.S.-based startups.

Q2 highlights

Key trends

The current data from Q2 2024 shows a boost in both deal count and total cash raised compared to Q1 2024. Q2’s deal count of 1,287 rounds totaling $20.9 billion is already a marked improvement over Q1. Both figures will increase further as some companies have a lag in reporting their data.

Q2 had the highest amount of VC cash invested in any quarter over the past year—and perhaps even longer, as data from Q2 financings continues to finalize in the coming weeks. The increase in deal volume relative to last quarter may indicate that Q1 was the trough and that market activity will stabilize or go up from here.

Q1 2024 represented a five-year high in the prevalence of down rounds, but Q2 reversed that trend. This quarter, the rate of down rounds fell from 24.2% to 17.4%. The falling trend is likely to continue. The downturn in VC fundraising is now more than two years old, which means that going forward, companies that are fundraising are more likely to have raised their most recent round in 2022 or after—in other words, after the period of inflated valuations that occurred in 2020-2021.

Seed deal count in Q2 is about even with Q1’s total, but Q2 will likely post a slight gain over Q1 after accounting for data lags. At the Series A stage, the data already shows that Q2 fared better than the previous quarter. The rebound in Q2 may represent a turning point from Q1, which had represented the lowest quarterly deal counts for both seed and Series A since early 2019.

Total cash raised for both stages increased modestly in Q2. At the Series A stage, Q1’s total cash raised was the lowest value recorded in the past five years. This quarter’s 16% increase still ranks Q2 among the lowest-earning quarters for Series A, but may signal the beginning of an upward trend.

Companies in the middle stages of fundraising experienced a slower quarter. Although the number of Series B deals picked up slightly in Q2, total cash raised declined. For Series C companies, both deal count and cash raised declined this quarter, after previously gaining momentum in Q1.

Year over year, both of the middle stages have declined in deal volume. Q2 2024 saw 22% fewer Series B deals and 27% fewer Series C deals than Q2 2023.

The volume of Series D deals recovered in Q2 after several quarters of volatility. There were 35 Series D deals on Carta this quarter, approaching Q4 2023’s count of 37. Deals at the Series E stage and beyond are rare and have remained flat at 19 deals for the past three quarters.

Series D deals raised a total of $2.5 billion in Q2, slightly up from $2.4 billion last quarter. Given the larger increase in volume, Series D deals raised smaller amounts of cash on average in Q2. On the other hand, the total cash raised at Series E+ surged over 300% in Q2. Considering the flat deal count, this means that rounds were larger on average.

Startups that raised a primary Series A round in Q2 had waited a median of 712 days, or just under two years, since their seed financing. Although this is down from Q1’s peak of 772 days, it still reflects the broader trend of longer intervals between primary rounds.

Fewer VC deals included investor-friendly terms in Q2. Participating preferred stock and cumulative dividends have both become less common in primary rounds since 2020, reaching new lows this quarter. During an interim period in 2021 and 2022 these deal terms became more common, but since 2023 the trend away from structured deal terms continued.

Overall, the decline in all three of the mentioned deal terms in Q2 indicates a move toward a more founder-friendly fundraising environment.

Fundraising & valuations

Since Q1 2022, median pre-money valuations have fallen less dramatically than total deal volume, especially at the seed and Series A stages. In Q2 2024, seed valuations finally surpassed Q1 2022 levels, rising by 1.96%. At post-seed stages, valuations are mostly moving upwards as well, though they have yet to reach Q1 2022 levels.

Deal volume at the seed stage has fallen 34.05% since Q1 2022. Considering the increase in median valuations, this suggests that seed investors are completing fewer but larger rounds. Deal count declines since 2022 have more closely tracked valuation declines at the Series C and D stages.

The median valuation for primary seed rounds reached a new high of $15.0M in Q2, up from $8.0M just a few years ago in Q1 2020. The volume of seed rounds has decreased slightly over the same time period.

Primary Series A valuations have held steady at $40.0 million for the past three quarters. The median Series A bridge valuation, however, has continued to climb. It reached $54.8 million in Q2, a year-on-year increase of 22%.

Primary Series B valuations rose for the third consecutive quarter, reaching a median of $116.3 million. For bridge rounds, however, median Series B valuations dropped 34% from Q1 to Q2.

Primary Series C valuations continued on a notable upward trajectory for the second quarter in a row, after previously reaching a low in Q4 2023. The median primary Series C valuation nearly doubled from $116.4 million in Q4 2023 to $214.8 million in Q2.

Series D had a strong quarter. The median Series D valuation rebounded by almost 200% since last quarter to $660.0 million, the highest figure of the past nine quarters.

The number of Series E+ deals on Carta has remained steady for the past three quarters at 19, a relatively small sample. As a result, a few mega-deals in Q2 may be driving the surge in median valuation. The median Series E+ valuation was $1.5 billion, a staggering 275% increase from last quarter. Q2’s median valuation was the third highest this decade, nearly tying the Q2 2022 high of $1.6 billion.

In Q2, median dilution in primary venture rounds remained level at the seed stage but declined for later rounds. The drop was slight for Series A, but relatively larger for the Series B, C, and D stages. For example, at Series B, median dilution fell from 17.1% in Q1 to 14.0% in Q2.

Following a similar pattern as dilution, the frequency of bridge rounds remained constant at the seed stage but dropped for later funding stages. Series B and C both saw their lowest levels of bridge rounds since 2022.

Geographical trends

The West has had a strong past 12 months, accounting for nearly 60% of all capital raised by startups on Carta between Q3 2023 and Q2 2024. California alone accounts for an outright majority with 51.74% of VC raised in that time period.

In Q2, the West lost some of the share of venture capital that it had reclaimed from the other census regions in Q1, though it is still by far the leader of the four regions. Startups based in the West raised 59% of capital invested on Carta total in Q2, as opposed to 63% in Q1.

The San Francisco Bay Area brought in a total of $7.4B in venture capital investment across 353 rounds in Q2. While this deal count is higher than last quarter, the amount of cash invested decreased slightly.

The New York Metro Area had a mixed quarter. While it brought in a recent high of $3.6B in VC cash, the number of rounds that took place in Q2 was the lowest in the past five years.

Startups in the Greater Los Angeles Area received a total of $2.5B across 62 deals in Q2. As with New York, Q2’s deal count is a record low for the past five years.

In Q2, the Greater Boston Area brought in $1.0B in venture capital, the lowest recorded by Carta in the past five years. Similarly, Boston’s Q2 deal count of 83 represents the second-lowest over the same time period.

Companies in the Greater Austin Area raised $0.5B in Q2 across 42 deals. Both deal count and total cash raised are up from Q1, but still down from Q4 2023.

Methodology

Carta helps more than 45,000 primarily venture-backed companies and 2,400,000 security holders manage over $3.0 trillion in equity. The data presented in this private markets report represents a snapshot as of July 29, 2024. Historical data may change in future studies because there is typically an administrative lag between the time a transaction took place and when it is recorded in Carta.

Financings

Financings include equity deals raised in USD by U.S.-based corporations. The financing “series” (e.g. Series A) is taken from the share class name in their applicable certificate or articles of incorporation. Primary rounds are defined as the first equity round within a series. Bridge rounds are defined as any round raised after the first round in a given series.