Q2 2024 Venture Report: Key Takeaways

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If built world venture capital markets proved one thing in Q2 2024, it’s that we are in an investor’s market. Despite additional dry powder contributed to the built environment, investors continued a conservative capital deployment strategy benefiting quality, early-stage startups. VCs with both built world-centric and adjacent investment theses raised $2.3B in Q2 2024, while venture capital inflows reached a three-year low.

A “higher for longer” interest rate environment has applied downward pressure to startup valuations, giving early-stage VCs an edge in determining the investment paradigm. Startup valuation pressures continue to hamper later-stage startup fundraising but have had less of an influence on the exit markets than one might expect. Investors and buyers alike have displayed an appetite for companies with traditionally reliable value drivers: capable management teams, product traction and established recurring revenue.

Key Takeaways

The notable trends emerging from Q2 2024’s built world venture activity include:

  • Increased investor interest in startups dedicated to solving the labor crisis (workforce management solutions), high-performance/sustainable materials, PropTech (real estate investment management, residential renovation management and real estate business intelligence solutions), energy transition and utilities management.
  • The initial hype for AI has subsided, and from an industry agnostic perspective, AI infrastructure startups have been the big winners.
  • A significant increase in the volume of built world tech exits by way of acquisition.
  • The fundraising environment for VCs investing in the built environment is the healthiest since Q1 2023.
  • Expanded use cases of SAFE notes at the Seed stage have led startups to raise at higher valuation caps. This, in turn, has created a larger hurdle for startups to scale to Series A and beyond, which has manifested itself in reduced built world VC activity at the Series A and B stages.

The skilled labor shortage, global housing shortages and grid transition requirements for the energy demands of AI will continue to propel built world venture funding, despite limited venture activity this quarter. Once interest rates start to move (the market is pricing in a September rate cut) the built up dry powder will start to find its way to well-positioned startups.