CapTable came into existence during the dawn of a “new normal”. Before going further, it's important to understand how we got here.
Overall Activity in 2023:
2023 witnessed a slowdown in activity.
The fourth quarter saw 3,934 completed deals, a 28% decrease from the peak in 2022.
Deal counts were higher than any quarter before 2021, except for Q1 2020.
Deal Value Descent:
Deal value plummeted to $170.6 billion, a drop of $71.6 billion from 2022 and $177.4 billion from 2021.
A significant portion of the decline is attributed to the $17 billion invested in Anthropic and OpenAI.
Capital Availability Challenge:
The demand-to-supply ratio model highlighted a void across all stages.
Despite challenges, over 4,000 companies secured their first VC investment in 2023.
Q4 2023 Trends:
Q4 showed an increase in early-stage, late-stage, and venture-growth-stage financings.
However, a substantial gap persisted between financial needs and available capital.
Pre-Seed and Seed Stages in Q4 2023:
Q4 was the least active for pre-seed/seed deal value and volume.
$2.8 billion was deployed across 1,176 deals.
Annual Strength in Pre-Seed and Seed Stages
On an annual basis, pre-seed and seed stages exhibited relative strength. Investors remained bullish due to outsized return potential and increased founder quality.
YoY Decline in Combined Deal Value:
The combined deal value for pre-seed and seed stages declined sharply from $24.2 billion to $14.6 billion.
Large investors pulling back from the seed stage contributed to this phenomenon.
Investor Confidence in Pre-Seed and Seed Stages:
Despite market challenges, investors expressed confidence in these stages.
The decline in deal value was attributed to market adjustments following the 2021 capital changes.
During Q1 2021 to Q4 2022, a surge of newcomers initiated innovative ideas alongside first-time fund managers (to be discussed later). This resulted in a simultaneous influx of these companies to the market, all seeking follow-on capital. The topic of LP funding will be addressed in the future. Consequently, heightened competition has led to a deceleration in access to capital, with investors prioritizing existing portfolio companies.
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