Everyone knows that the VC funding scene is nothing prefer it was in 2021 and early 2022. With Q3 of 2024 behind us, we now know that fintech continues to be experiencing a funding downturn. In reality, each deal numbers and funding totals are down from Q2 of this 12 months, with 179 fewer offers and $2.4 billion much less in funding quantity.
Whereas the drop is sobering, nevertheless, there are a number of vibrant lights in current funding knowledge which will sign the potential begin of a optimistic turnaround. I took a take a look at CB Insights’ current State of Enterprise Q3 ’24 Report, and listed below are my main takeaways.
Areas of micro development
As talked about beforehand, there are a number of points of CB Insights’ current knowledge that provide indicators of potential restoration:
Deal sizeThe drop within the common measurement is leveling off. To this point in 2024, the common deal measurement is at the moment $12.7 million, and in contrast the 2023 common measurement of $13.2 million, deal measurement falls round $500,000 quick. That is a lot smaller than the $3.2 million drop that passed off from 2022 to 2023, and appears fairly favorable when in comparison with the $11.6 million drop from 2021 to 2022.
Even higher information is that the median deal measurement has elevated for the primary time since 2020. To this point in 2024, the median deal measurement has elevated by $1 million. This comes after the median deal measurement dropped by $700,000 from 2022 to 2023 and decreased by the identical quantity from 2021 to 2022.
Resilience in early-stage investmentThe knowledge concerning deal stage distribution reveals that 71% of offers are nonetheless going to early-stage firms. This implies that traders stay optimistic about long-term innovation in fintech, even when they’re at the moment extra conservative with growth-stage investments. Buyers’ deal with early-stage firms might sign that they’re planting the seeds for future development, and could also be anticipating a restoration within the fintech sector.
Areas of concern
There are, after all, nonetheless some much less optimistic points of the Q3 funding knowledge, notably, M&A exercise and unicorn valuations.
M&A setting
The info signifies that curiosity in acquisitions is dropping. Within the third quarter of this 12 months, we noticed 146 exits made by way of M&A. Whereas this is a rise of six acquisitions when in comparison with the identical quarter final 12 months, it’s down from each the primary and second quarters of 2024, which have been 161 and 159, respectively.
Elevated M&A exercise typically means that the market is stabilizing, so the lower means that traders are both nonetheless involved about market circumstances or are holding out for decrease rates of interest.
New unicorns
The variety of new unicorns has dropped. Within the third quarter of 2024, there have been simply two newly minted unicorns. This stage is the same as what we noticed within the first quarter of final 12 months. The variety of new unicorns has dropped from three within the second quarter of final 12 months and from seven within the first quarter of this 12 months.
Is that this the underside?
Trying on the knowledge, it might seem that we’re fairly near the underside of the fintech funding stoop. And whereas I mentioned that final 12 months at about this time, this 12 months, we have now small indicators to again it up. Particularly, the primary enhance within the median deal measurement since 2020 is kind of encouraging and will point out the potential for elevated investor appetites.
Picture by Mikhail Nilov
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