Global funding slowed in the third quarter, even as AI continued to lead

Global venture funding in the third quarter of 2024 reached $66.5 billion, Crunchbase data shows. That’s down 16% quarter-over-quarter and 15% compared to the $78 billion invested in Q3 2023.

We are now nine or ten quarters into the current downturn in seed funding. The most recent quarter was the second below $70 billion since the start of the current downturn in venture funding, according to Crunchbase data. Outside of Q4 2023 and the most recent quarter, one would have to go back to 2017 to find another quarter below $70 billion.

But the third-quarter numbers don’t necessarily signal a further decline in venture funding going forward, as we’ve seen large funding fluctuate quarter-over-quarter this year and last, skewing the overall numbers.

Table of contents

Big, late rounds lead to decline

The third quarter saw the steepest year-over-year decline in late-stage funding and was most evident in the largest rounds, those $500 million and above.

The concentration of venture dollars going into the largest rounds — those of $100 million or higher — was also slightly lower in the third quarter, about 46%, compared to about 50% in the second quarter and third quarter last year.

AI LED

AI was the top sector by dollars invested in the third quarter, with funding for artificial intelligence startups reaching close to $19 billion, or 28% of all venture dollars, Crunchbase data shows.

Funding for AI companies has grown in 2024 by both absolute dollars invested and share. Last quarter was the second largest quarter for AI funding since the mainstream launch of OpenAI’s ChatGPT in November 2022, trailing only Q2 2024.

AI outperformed healthcare and biotech, the second largest sector, which raised more than $15 billion.

Hardware, the third largest sector, collected more than $13 billion. At the same time, financial services companies raised close to $8 billion.

The largest financing deals in the third quarter were all over $500 million:

Then step down years

Late-stage funding reached $34.7 billion, flat quarter-on-quarter and down from $46 billion in the third quarter of 2023, Crunchbase data shows. The biggest change in the third quarter from a year earlier was a decrease in the amount invested in deals above $500 million.

Last quarter, major funding went to companies in autonomous driving, defense technology, professional services, semiconductor and AI models.

Residential apartment in an early stage YY

Early-stage funding reached $24.7 billion, a quarter-over-quarter decline largely due to $6 billion in Series B funding for Elon Musk’s OpenAI competitor xAI in the second quarter, skewing those numbers upward. (On Wednesday, two days into Q4, OpenAI officially announced its own $6.6 billion raise that values ​​it at more than $150 billion.)

Year on year, funding in the early stages was unchanged. By far, large early rounds were dominated by AI and biotechnology.

Seed down

Seed funding reached $7 billion in the third quarter, down quarter-over-quarter and year-over-year, Crunchbase data shows. (Although it’s worth noting that there’s usually a gap because many seed fundings are often added to the Crunchbase dataset after the end of a quarter.)

The majority of seed funding – approximately $6.8 billion – was invested in funding of $1 million and above, in more than 1,500 companies globally.

Even Q3

So far this year, risk funding has decreased by around 7% compared to the previous year.

Based on an analysis of global funding in the third quarter compared to the same time frame in 2023, the seed funding year to date appears flat, (but is likely to show an uptick as seed rounds are added after the end of the quarter), with early stage funding trending up around 10% , and late-stage funding is down by about 20%.

While venture appears to be in a year-over-year holding pattern, the underlying dynamics of the industry are changing as venture fund fundraising slowed in 2024. With fewer funds, the impact will be seen in the earliest stages of funding going forward.

Methodology

The data in this report comes directly from Crunchbase and is based on reported data. The information is valid on 2 October 2024.

Note that lags in data are most pronounced in the earliest stages of venture activity, with seed funding increasing markedly after the end of a quarter/year.

Note that all funding values ​​are in US dollars unless otherwise stated. Crunchbase converts foreign currency into US dollars at the prevailing spot rate as of the date financing rounds, acquisitions, IPOs and other financial events are reported. Although these events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historical spot price.

Glossary of financing terms

We have made a change to how we include corporate financing rounds in our reporting starting in January 2023. Corporate financing rounds are only included if a company has raised equity financing at seed through a venture series financing round.

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes undisclosed series venture rounds, equity financings and convertible debentures of $3 million (USD or as converted USD equivalent) or less.

Early Phase consists of Series A and Series B rounds, as well as other rounds. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds over $3 million, and those less than or equal to $15 million.

The late stage consists of series C, series D, series E and later the letters risk rounds after the “series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate ventures and other rounds over $15 million.

Technology Growth is a private-equity round raised by a company that previously raised a “venture” round. (So ​​basically any round from the previously defined stages.)