The J-Curve is gone for now - the last few years have been mostly flat as countless startups were marked up highly and are still growing into their valuations.
https://www.angellist.com/data-center/the-state-of-venture-2024
AngelList’s 2024State of U.S. Early-Stage Venture & Startupsreport has landed, offering a comprehensive look into the ever changing dynamics of the startup ecosystem. From rebounding valuations to liquidity challenges and the AI boom, this past year’s insights are essential for founders, investors, and anyone navigating the early-stage venture landscape.
Here’s a detailed breakdown of the key findings:
1. Seed Valuations Rebound to 2022 Peaks
Seed-stage valuations have made a strong comeback, matching the highs we saw in 2022. The median seed round in 2024 is closing at a $20 million pre-money valuation, up from $10 million in 2020 which definitely skews to the high side. This doubling in valuation over just four years underscores both the resilience of the startup ecosystem and the ongoing investor appetite for promising early-stage companies.
While seed valuations are surging, pre-seed rounds are exhibiting more tempered growth. The median pre-seed valuation in 2024 hovers around $10 million—a 20% increase from $8.3 million in 2023. This bifurcation suggests that while investors are willing to pay a premium for slightly more mature startups, they remain cautious at the very earliest stages.
2. Liquidity Challenges: DPI-to-TVPI Ratio Declines
One of the more concerning trends highlighted in the report is the drop in the DPI-to-TVPI ratio, which fell from 16% in 2019 to 11% in 2024. For context:
TVPI (Total Value to Paid-In)measures the total value of a fund’s investments relative to the capital paid in by LPs.
DPI (Distributions to Paid-In)measures the actual cash returned to LPs.
A declining DPI-to-TVPI ratio indicates that while funds may look strong on paper (high TVPI), they are struggling to convert those paper gains into real, liquid returns (DPI). This growing gap is a clear signal that the venture ecosystem is grappling with liquidity challenges, likely exacerbated by the slowdown in IPOs and large-scale acquisitions.
For LPs, this underscores the importance of liquidity strategies, such as secondaries and continuation funds. For GPs, it’s a reminder that managing exit timelines and liquidity events is becoming increasingly crucial in delivering returns.
3. AngelList Fund Performance Benchmarks
AngelList’s platform data reveals that funds hosted on AngelList are outperforming traditional benchmarks in several key areas. While IRR (Internal Rate of Return) and DPI are roughly on par with other platforms, AngelList funds are showing stronger performance in TVPI, particularly for older vintages.
For instance, the median TVPI for 2017 vintage funds on AngelList is 3.57x, significantly higher than the 2.64x seen for 2018 vintages and 2.40x for 2019 vintages. However, the more recent vintages (2021-2023) are underperforming, with the 2023 median TVPI dropping to just 0.95x, reflecting broader market challenges. So lets just say that 2017 was an outlier year because it was early in the Angel List platform formation with very unique funds and investors that invested into some really great and early startups.
This outperformance in TVPI suggests that AngelList’s model—which often emphasizes diversified portfolios and access to a broad range of early-stage deals—is proving effective in generating long-term value.
4. Fundraising Activity Hits a Low, But Recovery Is on the Horizon
Fundraising activity has slowed significantly in recent years, with the report attributing this decline to the pandemic-era cash overhang. Many startups that raised large rounds in 2021 are either sitting on ample cash reserves or struggling to justify new raises at higher valuations. This has led to a cooling effect on the fundraising landscape, as both founders and investors recalibrate their expectations.
The annual activity rate in 2024 was historically low, with only 14.2% of active U.S. startups on AngelList experiencing a price-per-share change. Moreover, just under 62% of those changes were positive, marking the lowest tenor of positive activity in AngelList’s dataset.
It’s been a few rough years since the 2021 COVID-era Zero Interest Rate Policy (ZIRP) boom, where sky-high valuations and rapid markups became the norm. Many startups are still trying to grow into those lofty valuations, which has contributed to the flat performance seen over the last few years. The market’s correction has been necessary but painful, as companies recalibrate and focus on sustainable growth.
However, there are signs of a potential recovery on the horizon. With the rise of AI and a renewed sense of optimism, both investors and founders are beginning to feel better about the market’s direction. As valuations continue to correct and the market adjusts to a new normal, 2025 could see a modest rebound in fundraising activity. Startups that have demonstrated strong traction and capital efficiency during this downturn will be well-positioned to attract investment as confidence returns to the market.
5. The AI Boom Shows No Signs of Slowing
Perhaps the most striking trend in the report is the dominance of AI in the current startup landscape. Nearly one-third (32%) of all seed deals on AngelList in 2024 are AI-focused, a figure that dwarfs the peaks seen in previous waves of fintech and crypto investments. This marks a significant increase from less than 0.5% in 2017.
The AI/ML sector also captured 25.5% of all capital deployed on AngelList in 2024, more than triple the next closest sector, aerospace, which accounted for 7.2%. Healthtech and fintech followed, with 5.03% and 4.29% of capital deployed, respectively.
This AI surge is being driven by several factors:
Broad Applicability:AI technologies are being applied across a wide range of industries, from healthcare and finance to logistics and entertainment.
Investor Enthusiasm:The transformative potential of AI is attracting significant investor interest, with many VCs viewing AI startups as high-potential, high-reward opportunities.
Talent Availability:A growing pool of AI talent, coupled with advances in AI research and development, is fueling the creation of new startups in this space.
The AI boom is not just a passing trend—it represents a fundamental shift in how technology is being leveraged to solve complex problems and create new opportunities.
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