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Sapphire Ventures - September 2024 Market Memo.pdf
Key takeaway
- For entrepreneurs: Despite a challenging funding environment, opportunities still exist, especially in AI and enterprise software, with median round sizes and valuations expanding across most stages.
- For investors: The market is bifurcated, with AI investments surging while overall deal activity continues to decline, suggesting a need for careful sector selection and due diligence.
Summary
Sapphire Ventures' September 2024 Market Memo provides a comprehensive overview of the venture capital and public market landscape. The report highlights a mixed picture, with public software stocks rebounding in Q3 2024 but overall VC funding declining. AI remains a dominant theme, driving significant investments and valuations. The memo also notes a potential rebound in late-stage funding and an increase in median round sizes and valuations across most stages. However, the overall deal count continues to decline, reflecting a more cautious investment environment.
Insights
Public Markets
- Public software stocks outperformed semiconductors in Q3 2024, narrowing the year-to-date performance gap.
- Software sector showed resilience, with the Sapphire Broad Software Index gaining 8% in Q3
- Significant performance disparity among software companies
- First Federal Reserve rate cut occurred in September
Venture Capital Funding
- Total Q3 funding dropped to $77B, the lowest since Q2 2020
- AI-focused companies continue to attract large funding rounds, with six of the top 10 overall deals in Q3.
- Late-stage VC activity (Series C and later) rebounded, claiming over 40% of total investment for the first time in two years.
- Median round sizes and valuations expanded across most stages, with seed and Series C deals hitting new all-time highs.