Pre-Seed Startup Valuation & Fundraising Trends
The analysis of the Q3 2024 market shifts in venture capital, particularly at the pre-seed stage, reflects an interesting balance between rising valuations and decreasing fundraising targets, suggesting a cautious environment despite the slight optimism shown by the higher valuations. Globally, the median pre-seed valuation has risen from $4.55M in Q2 to $4.98M in Q3, but the average fundraising target dropped from $685K to $556K. This disparity hints at startups either facing less favorable terms or perhaps choosing to raise smaller rounds, potentially indicative of investor caution. Nevertheless, valuations have held relatively steady, hovering around $5M since Q1 2023, barring the notable dip earlier this year. This stability provides a sense of resilience in early-stage ventures, even if there are regional disparities.
The overall Q3 picture for pre-seed valuations and fundraising targets suggests a cautious but stable environment in most regions and industries. The global trend of slight valuation increases, paired with falling capital targets, indicates startups are positioning themselves conservatively. Early-stage venture capital remains a promising, though delicate, space amid broader market headwinds. Despite some regional downturns—most notably in Europe—there are clear pockets of resilience, particularly in the U.S. and select sectors like health, renewable energy, and software. If these trends hold, we could see continued gradual recovery as investors remain selective but cautiously optimistic.
Looking to put the shifts we see here in context, we can look to some of the early Q3 market reports which track the venture capital industry more broadly:
- According to CB Insights’ “State of Venture Global Q3 2024“, global funding fell from $68.1 billion in Q2 to $54.7 billion in Q3, with a corresponding drop in deal volume from 6,736 to 6,056. Notably, Asia gained a slightly higher share of deals as other regions, such as the US and Europe, saw declines. However, despite the overall drop in funding and deal volume, average deal sizes have increased—likely driven by AI-related investments—rising to $13.9M year-to-date from $12M in 2023. The median deal size also rose to $3M from $2.5M, with the US leading at $3.5M. Angel and corporate venture capital funding remained relatively flat, while private equity experienced more volatility but showed a slight uptick in 2024. Notably, 24 new unicorns were minted in Q3, the highest in a year, reflecting ongoing investor interest in select high-growth companies.
- On the other hand, the PitchBook report titled “Qualitative Perspectives: New Regime Begins” highlights the rise of secondary market transactions, which have become an essential liquidity source following the 2022 VC crash and reduced IPO and acquisition activity. During this period, secondaries were heavily discounted—down by as much as 50% in early 2023—but have since recovered, with median discounts narrowing to 21%. This is still far below the 10% premium seen in early 2022, but marks a significant recovery. The report also highlights that 85% of exits post-2022 occurred at a loss, indicating ongoing valuation pressures. However, the early-stage deal-making environment has shifted away from being highly investor-friendly, recovering toward a more neutral position with an index of 60.7, signaling potential stabilization and gradual improvement in early-stage funding conditions.
Both reports point to a market still undergoing correction, with varying degrees of recovery across regions, deal types, and stages, but with cautious optimism for continued stabilization in the coming quarters.
Q3 2024 Pre-Seed by Region and Industry
In Q3 2024, regional trends in venture capital valuations show notable differences across markets. The United States continues to lead with a median valuation of $6.45M, reflecting steady recovery after declines in prior quarters. Europe, however, has experienced a continued slide since late 2021, with valuations dropping to $3.88M, highlighting its struggles with economic and political instability. In contrast, the Middle East saw a 15% drop this quarter after prior gains but remains aligned with 2021 levels at $4.07M. Latin America and Southeast Asia have shown more stability, with relatively flat but slightly improving trends over the last three years. Africa remains at the lower end of the spectrum, with a median valuation of $1.77M, reflecting the region’s underdeveloped venture capital ecosystem. Despite regional fluctuations, the overall market shows resilience, with notable variance driven by local economic factors.
Industry-wise, health and medicine continue to command the highest median valuations, standing at $8.90M in Q3 2024, supported by investor interest in biotech and medical innovations. Renewable energy follows closely with $7.64M, reflecting the growing focus on sustainability. Software and IT remain robust with a median of $6.11M, driven in part by AI-related startups pushing valuations higher. Finance saw a significant correction, falling by nearly 39% after a substantial rise in the previous quarter, pointing to volatility in the sector. Meanwhile, food and beverage lags behind at $2.24M, as its physical nature and supply chain constraints continue to impact valuations. The overall industry landscape shows strong support for tech-driven and high-capex sectors, while traditional industries face more tempered investor enthusiasm.
Understanding these graphs: Rises or falls in valuation are largely indicative of the enthusiasm or optimism around new technologies, or perceptions of how founder-friendly the market has become. Capital requirements are shaped by dilution, so generally correlate with valuation though a non-correlated change could indicate the market shifting to more or less capital intensive companies (e.g. SaaS vs hardware).
Data sources: This data is sourced from valuations completed on the Equidam platform, which represent an objective and methodological perspective on startup valuation. This data includes qualitative qualitative characteristics of the company as well as projected financial performance, and a degree of calibration with market pricing data which comes from Crunchbase. For more information about Equidam’s approach to valuation, see our methodology paper. Our definition for ‘pre-seed’ covers recently incorporated startups which have less than $200,000 in revenue.
Startup valuation around the world
Analysis: 2024 Q2 vs Q3
To compare the two data sets for startup valuations in Q2 and Q3 2024, we can highlight the biggest shifts in valuation for each region and industry:
| Region | Q2 2024 ($USD) | Q3 2024 ($USD) | Change (%) |
|---|---|---|---|
| Latin America | 2,603,300 | 3,183,400 | 22.28% |
| Middle East | 4,794,500 | 4,069,400 | -15.12% |
| Europe | 3,924,800 | 3,882,300 | -1.08% |
| Southeast Asia | 3,767,200 | 3,828,000 | 1.61% |
| United States | 5,977,500 | 6,448,500 | 7.88% |
| Sector | Q2 2024 ($USD) | Q3 2024 ($USD) | Change (%) |
|---|---|---|---|
| Food & Beverage | 2,449,690 | 2,239,300 | -8.59% |
| Renewable Energy | 5,502,010 | 7,636,400 | 38.79% |
| Health & Medicine | 6,389,740 | 8,902,500 | 39.32% |
| Finance | 7,007,710 | 4,280,300 | -38.92% |
| Software & IT | 4,791,290 | 6,108,600 | 27.49% |
- United States: Continues to lead with a median valuation of $6.45M in Q3, showing recovery after a low earlier this year. However, it remains below its all-time high of $8.75M from Q3 2022. The consistent improvement over the last two quarters signals growing confidence among U.S. investors, though challenges remain compared to the highs of 2022.
- Europe: Here, we see a more concerning trend, with valuations steadily falling since Q4 2021. From a peak of $6.02M back then, Q3 2024 shows a drop to $3.88M. This decline, while somewhat stabilized by flat capital requirements, implies more dilution for European startups. The continued decrease, especially compared to other regions, underscores the region’s vulnerabilities, possibly influenced by political instability and economic headwinds.
- Middle East: The region experienced significant fluctuations, with a dramatic rise in valuations in 2022 but a subsequent correction. Despite a 15% drop in Q3, the overall trend aligns with 2021 levels, with a current median of $4.07M. The large top quartile ranges suggest that some high-valued outliers, particularly in sectors like AI, are still pushing valuations upward.
- Latin America: Though turbulent, the region has remained relatively flat over the past three years. The median valuation is now $3.18M, a moderate increase over the 2021 average of $3M. The nascent domestic venture capital market here, alongside fluctuating foreign capital, means stability will likely remain a challenge, but the trend is generally positive.
- Southeast Asia: Like Latin America, Southeast Asia has shown volatility but remained relatively stable. With a current median valuation of $3.78M, it reflects resilience amidst market shifts. Africa: Africa, with the lowest median valuation at $1.77M, reflects the region’s underdeveloped venture capital market. However, the broad range between quartiles suggests potential for standout performers, particularly in tech-related sectors.
- Health and Medicine: Leading in terms of valuations, the median stands at $8.90M, reflecting strong investor interest, particularly with the rise of biotech and medical innovations. The large range between the bottom and top quartiles emphasizes that some companies in this space are commanding extremely high valuations, likely due to the long-term potential and high capex nature of the industry.
- Renewable Energy: Another strong sector, renewable energy, has a median valuation of $7.64M. The relative tightness of the valuation range suggests fewer startups raising capital but doing so at higher values, indicative of the focus on sustainability and clean tech.
- Software and IT: With a median valuation of $6.11M, this broad category reflects a diverse set of startups, including those in AI. The inclusion of horizontal AI applications has kept valuations strong, though the range of sub-industries within this category can skew the overall picture.
- Finance: After a significant jump of over 60% in Q2, finance valuations have corrected by nearly 39% in Q3, reflecting volatility in the sector, likely driven by larger, unusual raises earlier in the year.
- Food and Beverage: As expected, this industry has the lowest median at $2.24M, reflecting the logistical and supply chain challenges that constrain growth in this more traditional sector.
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About Equidam's Startup Valuation Delta Quarterly
As the leading provider of valuations to early stage companies, we provide…
- Valuations with an open, standard methodology, focused on determining fair value
- Context on valuation data with associated capital requirements, revenue and EBITDA forecast data
- Coverage of established markets such as the US and Europe, as well as emerging markets like Africa and Southeast Asia.
These indicators collectively offer an understanding of the financial landscape and sentiment surrounding startups.
By examining these trends collectively, investors, entrepreneurs, and industry observers can gain insights into the overall health of the early-stage fundraising market. It helps identify emerging sectors, evaluate risk appetite, and make informed investment decisions. Additionally, analyzing these factors over time can provide a broader perspective on the evolving dynamics and trends within the startup ecosystem. Each quarter we will release our own analysis on this data, and what it implies for early stage fundraising.
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By striving to make fair valuation easier to calculate, we hope to give the tools to both founders and investors to understand the value of the company and have a productive discussion about price. To allow them to navigate hype and downturns with confidence, to compensate their employees fairly and to make solid returns for all stakeholders.