Q2’24 Venture Pulse Report – United States

AI was the clear winner with respect to VC investment in the US during Q2’24, attracting all sizes of funding rounds, including several of the largest deals of the quarter; in addition to CoreWeave and xAI, the US saw $1 billion investments in data-focused company Scale AI and AI-powered drug discovery company Xaira Therapeutics. Valuations within the AI space continued to be exceptionally strong compared to other industries, evidenced by the median valuation of AI companies growing significantly in recent quarters. Given some of the big bets being made in the AI space in the US, the fear-of-missing-out (FOMO) was likely a contributor to the strength of VC investment in AI this quarter.

Six-months into 2024, IPO exit value in the US ($28.4 billion) fell just shy of the total amount seen in 2023 ($29.3 billion). Following on the IPOs of social media platform Reddit and AI cloud company Astera Labs in Q1’24, Q2’24 saw additional IPOs by tech marketing firm Ibotta and cybersecurity firm Rubrik. Both companies saw strong initial results, with Rubrik raising $752 million¹ and Ibotta raising approximately $577 million in their April IPOs.² These companies have performed reasonably well since their IPOs, which could spur some additional interest in IPOs heading into Q3’24. There are no indications, however, that the IPO door will swing wide open, particularly given the upcoming US presidential election. While both startups and investors are feeling more optimistic about their ability to go public, any major surge in IPO activity will likely not come until 2025.

M&A exit value in the US was also well ahead of last year’s total at mid-year, but activity remained relatively soft compared to historical norms.

For nearly two years, VC investors in the US have put a lot of pressure on the companies within their portfolios to become more efficient — to manage their expenses, to manage their P&L, and to undertake whatever cost-cutting measures were required to extend their operating runway and push out their next funding round. While some companies failed and either ran out of money or got bought out, others succeeded. In Q2’24, VC investors began to reward these efforts, making significant investments in companies that have rationalized their businesses and proven their ability to survive in tumultuous times in order to drive for a 2025 or 2026 exit.

VC investment in the US is expected to remain relatively steady quarter-over-quarter, with the number of $100 million+ mega-deals continuing to grow. AI will likely remain a big ticket for VC investors the US, with increasing interest in industry-specific AI solutions. Given the ongoing focus on energy and cleantech in the US, VC investors will likely also show increasing interest in solutions aimed at reducing the energy requirements of the servers and infrastructure underpinning AI solutions.

Fundraising activity by VCs will likely remain sluggish heading into the second half of the year, except perhaps for funds focused specifically on the AI space; as exit activity increases, it will likely catalyze fundraising activity in subsequent quarters.

M&A activity could rise in Q3’24 as struggling companies look for buyers and corporates and PE firms look for deals.