National trends in VC spending: Up this quarter, but leveling out after spike

The number of companies registered in Delaware (1.5 million) exceeds its current population (1 million).

The state counts Tesla, Facebook, Walmart, Amazon, Google and Coca-Cola in its ranks of registered companies, because it’s traditionally been a very business-friendly state for taxes, businesses creation laws and its corporation law. But for us, and others interested in tech growth in the region, it’s an ongoing challenge to keep our pulse on VC spending.

However, we can look at Delaware statewide numbers as a reflection of national trends.

According to the latest Venture Monitor report, released quarterly by PitchBook and the National Venture Capital Association (NVCA), companies registered in Delaware raised $523 million across 98 deals in Q1. 

That’s a good bit more than any quarter in 2023, which saw an average between $300 million and $400 million. Delaware follows the trend many other states saw, with a record-breaking 2021 and 2022 with billions invested in several quarters, then a drop last year.

Notably, it appears only one of the five largest Q1 deals was for a firm that does operate locally in Delaware — the top one for the quarter: Synnovation Therapeutics’ $102M raise.

As always, it’s important to note: These figures may vary slightly after publication, as some deals aren’t accounted for until weeks after quarterly VC reports are published, or PitchBook may find errors in its data.

National venture capital trends

The nation’s total VC deal count was $36.6 billion across 3,925 total deals, relatively on pace with Q1 of last year, if not a little “to the left of the bell curve than usual,” said NCVA President Franklin.

The numbers are nothing to worry about, he added, saying the VC business cycle has been “effectively reset” in recent years, and is leveling out in 2024.

Kyle Standford, one of Pitchbook’s lead VC analysts, called Q1 a “calm” quarter in the report, saying that not very many outsized deals were closed, but overall deal count still stayed “relatively” high.

Valuations did rise, likely from a stronger performance of the public markets over the last few months, and the idea that already strong companies will be able to continue to raise in a slower market. Stanford did note that some market uncertainties and inflation have pushed the likelihood of lowered interest rates to the second half of 2024, and a recession “remains a possibility.”

Mid-Atlantic VCs on their 2024 outlook

Emily Foote, a partner at Philly’s Osage Venture Partners, told us in January that 2023 was a year “defined by investor caution, a painfully slow IPO market, steep valuation resets, and LPs skeptical of VC as an asset class.”

She wouldn’t call these normal ebbs and flows to the market, but “rather a significant market reset that we will likely continue to experience in 2024.”

Chris College, a managing partner with TCP Venture Capital, said that month he too feels the year’s VC activity will be dependent on how the economy plays out in the first few months of the year.

“We’re trying to find good companies to invest in and partner with and help grow, but it doesn’t look like it’s going to be the most attractive market for growing companies for the next year or two,” College said.

Melissa Bradley, a DC-based founder and managing partner at 1863 Ventures, said she feels the “21-month run of expecting a recession that hasn’t happened,” is also holding venture capital spending back.

Bradley’s accelerator works specifically with diverse founders who have been historically marginalized, and said that she feels that the challenging climate has forced companies to come to the table with “strong and solid opinions around how to manage their cap table.”

“As somebody who’s been doing this for over 20 years,” Bradley said, “I do believe that the presence of more people who have different thoughts allows the field to evolve.”

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This story has been updated to further clarify that many companies listed in Delaware are not actually operating in the state.