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Venture capital trend reports for the first quarter of 2024 are being published.

Haebom
It's already mid-April, and companies are releasing their Q1 2024 reports on results and trends. It does seem clear that the overall amount of investment has declined. To be more precise, it’s not that there’s no capital with VCs, but rather that investment execution isn’t happening. This could be seen as a sign that they aren't finding the right opportunities to invest in.
Also, with the market in a downturn and more focus on tech-driven investments, there’s been a clear uptick in planning exit strategies for existing portfolios. Meanwhile, the so-called big tech companies are actually cutting headcount globally while showing a stronger tendency to invest in promising startups.

Startup Valuations and Performance Improvements

Startup valuation refers to assessing a company’s value. In 2023, valuations were adjusted across most investment stages, but from the start of 2024, we’re seeing early signs of a rebound at the seed round level. Late-stage company valuations have dropped sharply, with over 80% of unicorns (companies valued at over $1 billion) being valued lower than in their previous funding rounds. Still, AI-related startups are maintaining high valuations, reflecting investors’ unwavering enthusiasm for technology-driven ventures.

Venture Capital's Cautious Investment Strategies

Venture capital (VC) refers to investment firms backing startups with high growth potential. In 2023, VCs stocked up on ‘dry powder’ (funds not yet deployed), looking for new investment chances. This signals that available capital has reached its peak. In the first quarter of 2024, while deal numbers didn’t climb, average deal size increased, showing a trend of larger amounts being funneled into the most promising startups.

Shifting Exit Strategies for Startups

A startup's exit strategy means how it recovers its investments, and the main routes are IPOs and M&A. In Q1 2024, startup exits were rather subdued, but M&A is expected to play a greater role going forward. The IPO market has shown some improvement, but full recovery is still distant. While the global volume of M&A deals fell in 2023, early-stage investment remained active in the US, and some young companies are holding onto high valuations.

Trends in Talent and VC Staffing

Hiring in technology and startups is happening with caution, while large corporations continue to restructure. In the VC sector, pressure on employees is growing due to challenges in raising funds, slower compensation growth, and fiercer deal-making competition. Junior-level roles are especially affected, with many experienced staff moving to other firms or returning to operational roles.
In 2024, there’s a clear trend of skilled professionals with hands-on experience switching to startups or VCs. Drawing on their backgrounds, they provide sharper investment judgment and practical advice to startups, helping maximize investment outcomes. This is playing a vital part in boosting growth and sustainable success among emerging companies.

LP and VC Business Strategies

LPs (Limited Partners) are investors who provide capital to VC funds, such as pension funds, insurance companies, endowments, and family offices. They are heavily influenced by fund performance, focusing on investment stability and profitability. Recently, family offices among LPs are increasingly turning to alternative asset investments.
Hybrid investors put money into both private (unlisted) and public (listed) companies, while crossover investors mainly invest in public firms but also seize private investment opportunities. By flexibly adjusting allocations based on market circumstances, they can spread out volatility risk.
CVC (Corporate Venture Capital) means large companies investing in outside startups to discover new business or adopt innovations. In the US, CVC activity with startups has increased, while globally, it's seen a slight dip.
Most VCs expect institutional investors to adjust their VC investment weights in 2024. VCs themselves are also facing pressure, with falling profit distributions and slow new fundraising.
CVCs can help startups grow rapidly by leveraging corporate infrastructure, networks, and expertise. They make strategic, long-term investments and are less focused on short-term returns. CVCs offer startups deep market insights and industry networks—often providing more added value than traditional VCs, and potentially leading to stronger investment results.

To sum up

With the growing presence of different investment actors in the VC market, VC investment has become ever more sophisticated and layered. This has made VCs approach investment decision-making with greater care, ultimately helping to keep the VC market healthy and fueling ongoing innovation.
Although the startup and venture investment ecosystem faces challenges, new change, opportunities, and sparks of innovation are already emerging. I’m hopeful for the industry’s ongoing progress. If you have more questions, please don’t hesitate to ask—I’m happy to answer anything you’d like to know.
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