Per @PitchBook, "25% of the VC investors active last year have paused new investments." pic.twitter.com/zfEVdPHsNE
— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) October 14, 2024
So it’s truly strange times in Venture Capital. Boom and Quiet Bust … at the same time.
On the one hand:
- AI is fueling a massive boom in venture investing, and a massive resurgence in unicorn and decacorn investing. From OpenAI to Anthropic to and more, massive amounts of venture capital are flowing into AI.
- The top funds keep raising more funds, and investing in many cases quickly. The top funds are still “going back to market” and deploying quickly.
- YCombinator valuations are higher than ever, and rounds are filled faster than ever. Even as they move to 4 batches a year. YCombinator is just a slice of the startup world. But it’s such a prominent one, that the fever and fervor to fund YC startups makes everything seem fast and furious.
On the other hand:
- IPOs have almost ground to a halt and M&A is way, way down. More on that here.
- Revenue multiples are way down, even as revenues themselves continue to grow. The average public SaaS company only trades at around 5x ARR. It’s hard for VCs to make money at those multiples. Not impossible, but hard.
- All but the top VC funds are struggling to raise new funds. Instead, they are quietly hunkering down.
Net net, what’s really happening outside of Andreesen, Sequoia, and YC (and similar)? Things are way down in terms of activity is the answer.
We can see it in the latest data from Pitchbook and the NVCA, which track data all across VC firms:
Even as the biggest and best funds VC invest furiously — the rest are investing less, or not at all.
You can see above the the # of VC firms investing is down ~62% from its peak of 2021, and at the moment, is pacing to be down even -25% from 2023.
This makes sense. The top VC funds can easily raise new funds, but the rest are struggling.
And Mega Deals are masking the fact that overall deals are still down, and down more in 2024:
It’s a sign of the Mixed Times today in venture. The Haves are still running a version of the 2021 playbook, just focused on AI.
And the rest? It’s kind of like 2014-2016.
At SaaStr Fund, we’re just a tiny piece of the market. We made 0 brand new investments in 2023, but 4 so far in 2024. So do your diligence. It can be hard to tell from the outside.