Where VC Dollars Flowed in 2024

By Rachel Williams

As a partner to startups and growth-stage companies across SaaS, retail, CPG, and cleantech, I've had a front-row seat to the rollercoaster that was venture funding in 2024. Let's break down where the money went, what it means for founders, and what to watch for in 2025.

The Big Picture: AI Dominance and Down Rounds

If I had to sum up 2024 in two phrases, they would be "AI everywhere" and "valuation reality check." According to PitchBook data, U.S. venture funding hit $209 billion in 2024, up roughly 30% from 2023. AI startups grabbed a whopping 46.4% of that total, with a significant chunk of funding going to larger players. OpenAI alone raised $6.6B in their early Q4 raise.?

Unsurprisingly, 2024 was also the year many companies had to face the consequences of overhyped 2021 valuations. Carta data shows that 20% of all deals were down rounds, with primary rounds seeing a record 14.4% drop in valuations. While down rounds can be disappointing, they are not rare. Even Facebook (now Meta) took a down round once, so you're in good company if you had to reset expectations.

Sector-by-Sector Breakdown

SaaS and AI

The standout story here is the AI valuation premium. AI SaaS companies commanded 24-200% higher valuations than their non-AI counterparts. The median Series A valuations also showed AI commanding a 25% higher valuation: $40M for non-AI vs $49.5M for AI. There was an even wider gap in Series B funding: $97.6M for non-AI vs $137.1M for AI.?

While these premiums might seem eye-popping, they're driving real innovation. But as someone who helps companies manage their runway, I'm cautioning my clients to not count on these premium valuations for AI lasting forever.

There were some non-AI software standouts, including Cybersecurity firms, landing significant rounds in the 2024 lineup.

Cleantech and Renewables

This sector had its first top-5 finish in Series A funding activity, with some of the highest median cash raises. As someone working with cleantech founders, I'm seeing increasing interest from both traditional VCs and corporate venture arms. The Inflation Reduction Act's implementation is creating tailwinds that smart founders are leveraging in their pitches. There is also increasing interest in renewables that are seeking and landing hefty government contracts, which provide stable long-term revenue.?

Consumer and Retail

2024 was tough for DTC retail and consumer products, particularly at the seed stage. The post-pandemic reset continues, with investors demanding clearer paths to profitability. For our CPG clients, we're focusing heavily on unit economics and sustainable growth metrics before approaching investors.

Women-Led Startups Are Still Fighting For Funds

Despite the overall funding increase, women founders continued to face an uphill battle. According to PitchBook data, women-founded companies received just 2.3% of venture capital funding in 2024, a slight decrease from 2023. This represents a persistent challenge in our ecosystem that needs addressing and could also be reflective of challenging retail and consumer products funding environments which tend to generate more female founders.

What's Working in Fundraising

Based on the deals I've helped structure this past year, here's what's resonating with investors:

1. Revenue Quality Over Quantity

Investors are scrutinizing net dollar retention and customer acquisition costs more than ever. Strong unit economics trump growth at all costs with a focus on healthy and sustainable margins.

2. Clear Path to Profitability

The days of growth without regard for burn, outside of the overheated AI market, are over. Careful management of your expenses including capital expenditures, hiring and even software may be scrutinized by discerning investors. My most successful raises included believable paths to break-even with detailed financial modeling, clean financial statements and a strong narrative.?

3. AI Integration Strategy

While we are still in the very early days of AI and practical solutions are sparse, companies have to address the AI question. How will AI impact their business? How is AI being tested to speed up development and grow your business? Don’t just throw out some buzzwords - focus on the practical applications where AI tools or partnerships can provide either growth or cost savings.?

Looking Ahead to 2025

The M&A market is showing signs of life, with Carta data indicating a 10-15% increase in acquisitions from 2023. For founders, this means that more exit opportunities might be on the horizon with viable paths from strategic buyers or IPO markets opening back up. Stay tuned for a future article on the private equity outlook and where they are investing dry powder.?

What This Means for Founders

If you're planning to raise in 2025 or early 2026, here's where I would focus:

1. Get Your House in Order

It all starts with the numbers. Establish clear KPI tracking across revenue and expenses. Your financial statements will only be as accurate as the data you are tracking. Run a number of different scenarios in your financial model to establish solid cash flow projections. Expect a high degree of scrutiny on net margins or profitability projections.??

2. Focus on Efficiency

Fundraises over the past two years have taken longer than years prior. Understand how far you can extend your runway and know your burn multiple. Model multiple scenarios in case your raise takes longer than projected.?

3. Build Relationships Early

If you haven’t already started investor conversations, make that your number one focus. Look for established connections through your financial partners, banks, or legal partners if you are starting from scratch. Many connections are also made through industry groups, so try to stay connected with networking groups of your peers.???

Keep in mind that venture capital is only one funding source. Depending on your business metrics, it might be a better pathway to consider alternative funding sources this year while you continue to build towards a more stable business. Venture debt, revenue-based financing and inventory loans may provide a better bridge for your capital needs in the near-term.?

Final Thoughts

While 2024 had its challenges, it also showed signs of a maturing market. Yes, valuations came down for many, but that's creating more sustainable companies in the long run. As your fractional CFO partner, our role is to help you identify the best strategy for your business, whether you're raising capital, managing cash flow, or planning for growth.

Remember, every market has its opportunities. The key is being prepared when they present themselves. If you're thinking about raising capital or need help getting your financials ready for investors, let's talk. Sometimes an experienced financial partner can make all the difference between a successful raise and a missed opportunity.

ScaleUp Financial Solutions supports numerous startups and growth stage businesses through capital advisory, financial statement preparations and accounting support. Learn more about our services.