US Seed Investment: Resilient in Downturn, Bright Prospects for 2024

US seed funding has remained strong despite a decline in startup investments worldwide. This is promising for the future in 2024.

US seed funding increased by almost 10% in 2022, but then dropped by 31% in 2023. However, it still remained more stable than funding at other stages. This downturn, while significant, was less severe compared to the broader investment landscape, with seed funding still above pre-pandemic levels.

Investors are positive about the growing startup environment, with lower company values and more skilled workers, which could benefit early-stage companies in the future. In the last ten years, seed funding in the US has increased significantly, reaching a peak of over $16 billion in 2022 before dropping to $11.5 billion in 2023, which is still higher than the investment levels of 2019 and 2020.

The current market dynamics have led to more selective investment practices at the seed stage, with a higher bar for funding and a trend towards more mature, ‘seed plus’ or ‘A minus’ rounds. This selectiveness stems from an increased focus on companies with a clearer path to Series A funding and beyond, indicating a more disciplined and patient approach to seed investing.

Furthermore, the journey from seed to Series A funding has lengthened, with startups taking more time to mature and de-risk, reflecting a shift towards more substantial, well-vetted investments. This trend towards maturity and selectiveness at the seed stage, coupled with a challenging but opportunity-rich environment, sets the stage for a nuanced and potentially rewarding investment landscape in 2024.