The results from the second annual survey corroborate broader industry reports indicating a resurgence in the pre-seed market, even as later-stage investments continue to grapple with a downturn.
NEW YORK, NY / ACCESSWIRE / November 28, 2023 / Forum Ventures, an early-stage B2B SaaS fund, accelerator, and venture studio, today released results from its second annual State of the VC Market survey, which aggregates industry feedback from investors who have participated in pre-seed and seed rounds from January to October 2023. The report unveils insights into valuation trends and the pace of deal flow, offers valuable advice for founders navigating the current market conditions, and forecasts upcoming shifts in the investment landscape as we approach the new year.
The State of the VC Market 2024 collected data from 167 pre-seed rounds closed in 2023. The survey spanned two weeks in early November and gathered responses from a diverse range of professionals, from Associates to Managing Partner roles, at various North American venture capital firms. Prominent funds participating in the survey included Outsiders Fund, High Alpha, Outbound Capital, Female Founders Fund, and Right Side Capital Management, among others.
Key findings from the survey include:
- Majority of companies invested in were from NYC (19.6%) and the SF Bay Area (24%)
- Popular industries invested in include Fintech (13.2%), Gen AI (12%), and Future of Work (10%)
- Strong founders (deep domain experience plus grit) were the main reason investors said "yes" to an investment, followed by traction
- Pre-seed market shows signs of recovery, but later stages are still facing downturn
- 75% of respondents confirmed valuations have decreased since 2022, citing an increased number of companies competing for a smaller pool of capital
- The probability of a Seed company raising a Series A has fallen dramatically, so early-stage investors are taking on additional risk
- To sustain their operations for the next 6-12 months, founders must secure early customers and generate revenue, but also recognize that revenue is no longer a supplement; it's an absolute prerequisite for securing future funding
"This is undoubtedly one of the hardest fundraising environments I've seen in the last 10 years," says Mike Cardamone, Managing Partner at Forum Ventures. "This affects both investors looking to deploy capital and raise from LPs, as well as founders looking to raise capital to accelerate their pre-seed startups. Founders rarely get access to transparent advice from investors on making their startups stronger to raise capital more successfully. This survey collects sentiment straight from the source…providing founders with actionable advice and insights into the investment decision-making process."
As one survey respondent stated: "We are going through the VC nuclear winter now." In response to the challenging climate, survey participants advise founders to practice prudent cash management and consider leveraging internal resources to bridge funding gaps until they can secure more favorable terms in the upcoming 6-12 months. Furthermore, the recommendations emphasize a shift towards non-dilutive funding sources such as revenue and grants rather than heavy reliance on VC investments. To secure a promising Series A term sheet, founders are urged to focus on achieving early Product-Market Fit (PMF) and attaining annual recurring revenue (ARR) of $1.5 million or more with a growth rate of 100%-200% year-over-year. Achieving this milestone often necessitates raising substantial pre-Series A funding, typically in the range of $2 million to $4 million, in most cases.
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ABOUT FORUM VENTURES:
Forum Ventures is the top B2B SaaS fund, accelerator, and venture studio, backing founders from zero to sustainable. Founded in 2014 as Acceleprise, the firm is on a mission to make the B2B SaaS journey easier, more accessible, and successful. With over 300 portfolio companies, Forum founders have gone on to raise $1B in follow-on funding from investors like: NEA, Andreessen Horowitz, Uncork Capital, 8VC, Founders Fund, Menlo Ventures, Canaan, Bowery Capital, Susa Ventures, Salesforce Ventures, SV Angel, True Ventures, and many more. Learn more at www.forumvc.com.
Lauren Gill, MAG PR at email@example.com; T: 978-473-1362.
SOURCE: Forum Ventures
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