Startup Metrics Are Actually Improving Heading Into H2 2024

Narrative violation - things in US startup world are actually improving.

Yes, this isn't 2021. And yes, the challenges for many individual founders have multiplied.

But funding is pulling out of the nadir of 2023. And there are many metrics beyond simple dollars invested that point to a better H2 2024.

Not an exhaustive list below, and the missing metrics – mostly financial growth and margin data for startups – are obviously crucial.

But these indicators remain useful hints as to the future state of fundraising, so let's run through them quickly.

𝗙𝘂𝗻𝗱𝗿𝗮𝗶𝘀𝗶𝗻𝗴 𝗣𝗮𝗰𝗲

• The OG metric. Currently about $19B invested every quarter into Carta companies

• Getting slightly better over the past couple quarters but nothing major

𝗣𝗲𝗿𝗰𝗲𝗻𝘁 𝗕𝗿𝗶𝗱𝗴𝗲 𝗥𝗼𝘂𝗻𝗱𝘀

• A view into whether VCs are extending their current portfolio companies or spending more time making new bets

• Dropped from 40% to 34% from Q1 to Q2 --> improving!

𝗣𝗲𝗿𝗰𝗲𝗻𝘁 𝗗𝗼𝘄𝗻 𝗥𝗼𝘂𝗻𝗱𝘀

• Are companies having to take haircuts to prior valuations?

• 21% in Q2 after 23% in Q1 --> slightly better

𝗧𝗶𝗺𝗲 𝗕𝗲𝘁𝘄𝗲𝗲𝗻 𝗥𝗼𝘂𝗻𝗱𝘀

• How long it takes for the next primary fundraise. Important for founder runway and funder graduation rates

• A median of 2.3 years right now which is historically quite high. Flat from Q1

𝗧𝗼𝘁𝗮𝗹 𝗘𝘅𝗶𝘁𝘀

• When all this work pays off in an IPO or M&A transaction

• ~150 quarterly, the vast majority M&A...flat.

𝗘𝗺𝗽𝗹𝗼𝘆𝗲𝗲 𝗘𝘅𝗲𝗿𝗰𝗶𝘀𝗲 𝗥𝗮𝘁𝗲

• Usually a lagging indicator of employee sentiment around their startup and the value of equity writ large.

• About 33% of in-the-money options exercised before expiration right now. That's low, but at least it stopped falling.

𝗦𝘁𝗮𝗿𝘁𝘂𝗽 𝗟𝗮𝘆𝗼𝗳𝗳𝘀

• Obviously layoffs suck but they also were in service of capital efficiency over the past 18 months.

• About ~6K per month right now which is MUCH BETTER than the 10K this time last year --> improving!

Overall, I think we are in a period of consolidation. The massive change over 2023 has mostly subsided and we can now look forward to better fundraising over the next year or so. Not easy, not boom times, but better.

But I'm an optimist 😁 so please suggest some other metrics I may have missed in the comments. Even if those missing metrics paint a less rosy picture.

#cartadata #startups #founders #fundraising