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

• Positive signs in venture activity: The number of rounds and total cash raised by startups both increased this quarter. Primary round valuations rose at all stages except for Series A, where they held steady.
• More founder-friendly environment: The rate of down rounds fell to a six-quarter low, and it is less common for deals to include structured terms that favor investors. Bridge rounds also fell for Series A through C.
• Northeastern recovery: Startups based in the Northeast increased their share of VC cash to 25%, at the expense of the West and Midwest census regions. The New York Metro Area brought in $3.6 billion this quarter, a notable increase from Q1.

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.

The data presented in this 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. In addition, new companies signing up for Carta’s services will increase historical data available for the report.