TLDR:
- M&A deals for VC-backed startups are down in H1 2024, with only 904 deals completed.
- Semiconductor startups are attracting significant funding, with a 25% increase in funding in the first half of the year.
In the first half of 2024, the startup world has seen trends similar to those of the previous year. AI continues to be a primary focus for venture capital, while IPO activity remains subdued. Crunchbase News highlights five key trends to watch in the second half of the year.
Slow Growth in M&A Deals: Despite expectations of a revival, M&A activity for VC-backed startups is down in 2024 compared to the previous year. Only 904 deals were completed in the first half of the year, with reasons ranging from high valuations to regulatory uncertainties, hindering deal flow. Although some significant deals, like Merck’s acquisition of EyeBiotech, have taken place, overall M&A activity remains stagnant.
Rising Funding for Semiconductor Startups: The semiconductor sector has attracted increased investor interest, with funding for chipmakers up by 25% in the first half of 2024. This trend is driven by the demand for specialized AI chips that offer improved efficiency and performance. Companies like PsiQuantum and Celestial AI have secured substantial funding rounds, indicating a positive outlook for the sector.
AI Funding Surge: Funding for AI-related companies saw a significant surge in the past quarter, reaching $24 billion. The sector continues to attract substantial investments, with one in every four dollars invested so far in 2024 going to AI-related startups. While concerns exist regarding revenue generation for such companies, the overall momentum in AI funding remains strong.
New Scout Funds Emergence: The launch of funds like Menlo Ventures and Anthropic’s $100 million joint AI fund, Anthology, points to a growing trend of venture firms partnering with operators to access promising deal flow. AI companies, such as OpenAI and Nvidia, have also established their own funds to support startups in the sector. This trend highlights the increasing competition and interest in AI investments.
Project Finance Upsurge: Startups with high infrastructure costs are increasingly turning to debt financing as a viable option. Large debt rounds, particularly in sectors like cleantech, have been prominent in recent months. With expected interest rate cuts and a large pool of companies that raised significant equity funding in previous years, debt financing is likely to gain traction as a less dilutive capitalization method for scaling companies.
