The $100 Million Startup Fundraise - Going Extinct?
For the past 5 years, $100 million+ mega-raises became routine in the startup world. With abundant capital and fierce appetite for finding the next unicorn, investors eagerly poured nine-figure checks into both early stage startups and late stage private companies to rapidly fuel their trajectories towards IPOs.
But that era of massive startup financings may be disappearing quickly. As venture investors grow increasingly selective and public market uncertainty rises, the $100 million milestone fundraising may go extinct in 2024. Investors predict deal sizes will shrink across all stages next year as writing outsized checks will require more proof that outsized returns can follow.
Between 2020-2021, U.S. startups saw 160 mega-rounds above $100 million accounting for around $140 billion in capital according to Pitchbook. However, deal count and value both declined by nearly 50% already in 2022. And the trend towards smaller raises will likely persist.
In the past, large raises were often fueled by FOMO - fear of missing out on the next big score. But with volatile markets, resetting valuations, and murky exit visibility, investors can no longer bank on endless upward trajectories and bubble-level startup growth.
The Game Changer: AI Efficiency
Interestingly, the very artificial intelligence technology investors have poured billions into could now help startups thrive on smaller pools of capital. By leveraging AI systems for computer vision, predictive analytics, customer insight, product improvements, and more, startups can drive more efficiency and impact per dollar invested.
Experts point out that they've seen AI help startups cut computing costs over 75%, triple marketing ROI, reduce staffing needs, and drive many other gains allowing them to stretch funding much further. For smart firms, reaching profitability is faster without chasing mega-rounds.
Startups seeking funding may need to ratchet down expectations of easily raised nine-figure rounds. Proving business models through strong unit metrics on smaller raises first may be the wise path before stepping up to larger rounds. The $100 million mega-deal gold rush appears to be ending, but AI-powered startups can thrive nonetheless.