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 remains 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, nonetheless, there are a number of vivid lights in current funding information which will sign the potential begin of a constructive turnaround. I took a take a look at CB Insights’ current State of Enterprise Q3 ’24 Report, and listed here are my main takeaways.
Areas of micro development
As talked about beforehand, there are a number of features of CB Insights’ current information that supply indicators of potential restoration:
Deal sizeThe drop within the common dimension is leveling off. Up to now in 2024, the typical deal dimension is presently $12.7 million, and in contrast the 2023 common dimension of $13.2 million, deal dimension falls round $500,000 brief. That is a lot smaller than the $3.2 million drop that befell 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 dimension has elevated for the primary time since 2020. To this point in 2024, the median deal dimension has elevated by $1 million. This comes after the median deal dimension dropped by $700,000 from 2022 to 2023 and decreased by the identical quantity from 2021 to 2022.
Resilience in early-stage investmentThe information relating to deal stage distribution reveals that 71% of offers are nonetheless going to early-stage firms. This means that buyers stay optimistic about long-term innovation in fintech, even when they’re presently 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, in fact, nonetheless some much less constructive features of the Q3 funding information, notably, M&A exercise and unicorn valuations.
M&A surroundings
The info signifies that curiosity in acquisitions is dropping. Within the third quarter of this 12 months, we noticed 146 exits made through 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 usually means that the market is stabilizing, so the lower means that buyers are both nonetheless involved about market situations 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 degree 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?
Wanting on the information, it will seem that we’re fairly near the underside of the fintech funding droop. And whereas I mentioned that final 12 months at about this time, this 12 months, we’ve got small alerts to again it up. Particularly, the primary improve within the median deal dimension since 2020 is kind of encouraging and will point out the potential for elevated investor appetites.
Photograph by Mikhail Nilov
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