Global Venture Capital Trends 2024 insights on Startup Investment Dynamics Part 1

Eric Weber, CEO and founder of SpinLab – The HHL Accelerator, shares his analysis of the global venture capital landscape. Covering international, national, and regional developments, his insights reveal the shifting dynamics of startup financing in 2024 and what founders and investors need to pay attention to.

About SpinLab Founder Eric Weber 

Eric Weber, CEO & founder of SpinLab, runs an accelerator program for startups and has extensively contributed to the creation and funding of numerous startups in many different sectors such as smart city, health, bio-economy, robotics and many more. With SpinLab, he is also CEO of Smart Infrastructure Ventures and serves on various advisory boards of big corporations and public administrations.

Global VC in 2024: Steady Volume, Fewer Deals

Half-Year Trend Confirmed: VC Volume Holds Steady: At USD 274.6 billion, the global VC volume remained almost constant compared to the previous year and therefore well below the levels of the boom years 2020 to 2023. It is worth mentioning that the number of deals has fallen significantly to 26,961. It is therefore more difficult to close VC deals, but when founders are successful, the average volumes are higher, especially in later rounds.

Driven accordingly by a few huge rounds - 37% for AI: Historically large financing rounds for AI companies such as databricks (USD 10 billion Series J - for comparison: this is significantly more than was invested in the whole of Germany in the entire year), OpenAI (USD 6.6 billion), xAI (2x USD 6 billion each) or Anthropic (USD 4 billion) took place in the USA in particular. As a result, AI start-ups accounted for a total of 17% of all deals, but over 37% of the deal volume. The large financing volumes were justified by the need to rent GPUs for the development and training of generative AI models.

Accordingly, the market became nervous early in the year when Chinese company DeepSeek suddenly presented a powerful and much more cost-efficient large language model (LLM), which could be trained more cheaply and was released as open source. This challenges the fundamental assumption that model quality correlates directly with capital-raising ability, making the large U.S. players unbeatable. In addition to the models themselves, significant money has flowed into “AI agents and digital coworkers,” “AI in customer support,” and “edge AI processors.”

Europe stable compared to previous year: For years, a quarter of all financing rounds have taken place in Europe, while a little less than a third took place in Asia and a little more than a third in the US. However, in the US there are much more so-called megarounds with a volume of more than 100 million USD - almost twice as much as in the rest of the world combined. A long-term trend shows that Europe's share of cumulative company valuations of start-ups by year of foundation has more than tripled in the last 30 years. In other words, the VC market in Europe is well established, with a lower risk of market exaggerations or significant overvaluations. The situation is quite different in Asia, where the financing volume has reached a ten-year low.

High degree of market concentration in the USA: One reason for exaggerations and potential misallocations is a high degree of market concentration in the US. 75% of total fund investments in 2024 flowed into just 30 VC funds. Over half in the 10 largest funds. In the search for suitable multiples/returns, these funds have to implement ever larger VC rounds at higher valuations in the hope of realizing them in exits. In contrast, the number of active VC investors is at a ten-year low, as many fund managers are failing to launch new funds.

Investments by US tech companies: The Magnificent 7 (Mag 7) - i.e. the largest US tech companies such as Meta, Google, Amazon, Microsoft - invested more VC in start-ups last year than the total amount of money invested in Europe or China. This once again impressively demonstrates their economic significance and power. There is not a single European company in sight that invests anywhere near as actively in start-ups, so further concentration is to be expected. At the same time, the dangers of misallocation are also immanent here.

Source: Dealroom.co

Problem - fewer exits: However, the number of classic start-up IPOs is at a 5-year low globally and the SPAC segment has also collapsed. It is also taking longer: after the average duration between the first financing round and IPO was just over 5 years for years, the duration has recently risen to over 7.5 years. With around 8400 M&A deals globally, this remains by far the most important route to an exit. This is roughly the same as the previous year, but a far cry from 2021 and 2022. Interestingly, more exits have taken place in Europe than in the US every quarter for around two years. One reason for this could be the high US VC valuation levels, which make it more difficult to find buyers for M&A deals. The problem becomes even clearer when looking at exit proceeds: measured in terms of assets under management, proceeds are at the level of the 2008/2009 financial crisis.

Secondaries are becoming more popular: the pressure in the exit sector and the search for liquidity are boosting a tried and tested instrument. Secondary funds, i.e. funds that specifically buy first-time investors out of deals and generally negotiate a valuation discount, are gaining momentum. Investors such as Isomer Capital, Launchbay Capital, Giano Capital, Cipio Partners and Vintage IP have set up special vehicles for this purpose.