Prediction: 2024 will be a better year for startups

2023 was a challenging year for startups. Rising interest rates squeezed the market, leading to overly cautious investors and a dwindling pool of funding. Crunchbase notes that investment across all startup stages fell from $230.5 billion in 2022 to $144.3 billion in 2023 — a pronounced decline of 37%.

However, there are reasons to be cautiously optimistic about 2024.

Based on the industry trends in PitchBook and our observations at the University City Science Center, here are a few predictions we have for 2024 and what startups can do to best prepare for the challenges and opportunities ahead:

A revitalized market

• With positive economic indicators emerging through 2023, we anticipate a resurgence in IPOs next year. This rebound seems poised to revitalize the market and boost investor confidence.
• We expect US venture capital fundraising to gather momentum, potentially reaching levels similar to those in 2020, which would signify a substantial improvement from 2023.
• Startup support initiatives, including our own Capital Readiness Program, will become increasingly critical. Their role in catalyzing deal-making and providing essential support to startups is set to grow in importance.

Investors take a pragmatic approach

• Insider-led funding rounds are likely to maintain or even surpass their 2023 levels, reflecting a continued reliance on trusted networks within the venture capital ecosystem.
• However, the count of active unicorns and their aggregate post-valuations might see a decline, suggesting a more cautious and realistic approach to valuations.

Anticipated VC activity

• In an environment of stable or falling interest rates, we foresee an uptick in VC deal activity, particularly with the involvement of nontraditional VC investors. This could open up new avenues for funding.
• The average size of US VC funds may decrease, which could indicate a shift toward more focused, strategic investments.

(Courtesy University City Science Center)

The landscape is evolving, but with the right strategies, startups can not only navigate these changes but also capitalize on new opportunities.

As for startups preparing for the challenges and opportunities of 2024, here are some general tips:

Stay agile

In a fluctuating market, the ability to pivot and adapt quickly is invaluable.

Build strong networks

Relationships with investors, mentors, and industry peers can provide crucial support and opportunities.

Focus on sustainable growth

Prioritize building a solid business foundation over rapid expansion.

Leverage startup support programs

These programs offer not just funding but also mentorship, resources, and networking opportunities.

Stay informed

Keeping abreast of market trends and investor sentiments can help in making strategic decisions.

Emphasize value proposition

In a competitive funding landscape, clearly articulating your startup’s unique value is key.

Plan for multiple scenarios

Having contingency plans for different market conditions can help navigate uncertainties more effectively.

Maintain focus on DEI

Even in challenging times, it’s vital to keep diversity, equity, and inclusion at the forefront of your business strategy, ensuring a varied range of perspectives that can foster innovation and broader market appeal.