Key Takeaways
Our H1 2024 State of the Markets report finds that, two years into the most significant contraction of the innovation economy since the dot-com crash, signs of normalization — and even recovery — are emerging.
1 in 4 Funds closed in 2023 focused on AI
Innovation related to artificial intelligence was a bright spot, driving a large portion of US VC fundraising and investment in 2023.
67% Of US VC-backed tech companies reduced net burn
Tech companies are adapting to the new financial normal, with the highest number in recent history reporting year-over-year reductions in net burn rates.
+60% Of companies went on to raise another equity round following a down round
Down rounds aren’t the end of the line which is a good sign when at least 13% of all US VC deals in 2023 were down rounds.
Investors get more selective
A rising number of patents held by funded companies suggests investors are seeking technical differentiation to guide their funding decisions.
As capital has become more constrained, investors have sought out companies with greater intellectual property than their peers. Companies with more than 15 patents showed greater resilience in deal activity, with a decline 14% less severe than companies with fewer patents.
Source: PitchBook Data, Inc., PitchBook Data, Inc. custom analysis and SVB analysis
Source: PitchBook Data, Inc. and SVB analysis
Down rounds aren’t the end of the line
A down round isn’t all bad, in fact roughly 70% of companies go on to raise another equity round after taking a down round.
Dating back to 2015, for companies that raised another equity round the median valuation increase following a down round is north of 100%.
AI takes center stage
AI technology was the focus of one in four funds that closed in 2023, joining an investment cycle that has steadily increased for the past decade.
ChatGPT has ushered in a new era for AI that could unlock the potential of a long-term investment cycle in the same way that the iPhone did for mobile technology.
Cash-heavy companies are running out of runway
Roughly half of US VC-backed startups will be out of cash by Q4 if they do not raise – the highest share since 2019.
Companies with the most cash runway have seen the largest declines in runway, reducing the spread between those in the top decile and those in the bottom decile by 40% since 2021.
Source: SVB proprietary data and analysis
Explore other SVB reports
Written and researched by SVB experts
Our deep relationships with top entrepreneurs and investors inform our insights and give us a vantage point unlike any other bank.
