Foley & Lardner August 2024 Newsletter

Friends,

In?last month’s newsletter, we reviewed the status and trends of the venture capital markets in the District of Columbia and delved into the surge of AI visual media.

This month, we provide an overview of global venture capital activity in Q2 of this year. We will also examine the current landscape for new VC entrants as larger funds maintain their dominance.

The Q2 venture capital investment data has been released, and it brings some promising news. CB Insights has published its State of Venture Report, providing an overview of the last quarter. The main highlight of the report is the continued dominance of AI as a major area of interest for investors. According to CB Insights data, 28% of all VC dollars were invested in AI startups, marking the highest quarterly share on record. In Q2, AI startups received a total of $18.3 billion, showing an impressive 32% increase compared to the previous quarter. This growth was mainly fueled by several deals valued at over $1 billion.

According to the data, global venture funding has increased for the second consecutive quarter, showing an 8% quarter-over-quarter growth. Venture capital investment amounted to $64.7 billion in Q2. Despite this, the number of deals globally is still lower, at less than half of what was observed at the peak during Q1 of 2022.

Despite the decrease in the number of deals, the size of each deal increased by 17%. The average deal size was $14.4 million, marking a 17% increase from the average in 2023. CB Insights highlights that, despite the current cautious environment, the size of the deals being completed has increased significantly as investors are backing select startups with larger investments.

Regarding exit activity, the U.S. and Europe accounted for 39% of global exits, including M&A and IPOs, representing a 4% increase from the previous quarter.

Newcomers entering venture capital face a tough time. Global VC fundraising is at its lowest since 2015, hitting emerging managers hardest. They're raising less than ever before—632 funds totaling $80.5 billion in the first half, projecting fewer than 1,300 new funds this year, a significant drop from 2021's peak.

Amid broader challenges, larger firms continue to secure substantial funding. For instance, Countdown Capital, which started in 2020, recently ceased operations. Founder Jai Malik highlighted the advantage of larger firms in the current landscape. If emerging managers retract, it may intensify competition for startups and lead to a contraction of the venture capital ecosystem.

During the summer months, we have put on several events for entrepreneurs and investors and are delighted to see activity picking up. Stay tuned for more in August and September.

As always, do not hesitate to contact us if we can help you brainstorm a legal or business challenge you are facing or connect you to a potential investor, professional, or entrepreneur.

Natasha Allen , Lisa Conmy , David Kantaros , Jeff Bowman , Von Bryant , Steven Cade , Eric Chow , Brandee Diamond , Maureen Easton , Louis Lehot , Julie-Anne Lutfi , Nicholas O'Keefe , Taylor Pancake , Kevin Shuler , Glenn Singleton , Lyman Thai , André Thiollier , Brian Wheeler , Melissa Conroy , Blake Tengberg , Alan Pate , Alidad Vakili