TSN #13 - VC Path & Companies Winning at Fundraising Today

Hey! 👋

I have many friends who decided to pursue the venture capital route. I often have conversations with them, and they all talk about runway and the difficulty of raising funds during the "VC winter," even though it's summer.

My aviation ground school taught me something about runway. In simple terms, I would describe an asphalt runway as the necessary distance to increase velocity so that enough lift is generated for takeoff.

Replace asphalt with money, distance with time, velocity with revenue, and lift with sustainable growth. That should work as a translation into business terms.

The data shows some interesting trends, and some industries have a better chance of getting funding. This issue will be more visual, so let's look at it!

Also, I’ve recently updated my recommendations list, if you are looking for some summer inspiration, check it out.

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Venture Capital winter, huh?

The chat bellow is pretty self explanatory. Three important things. First, the total number of deals (blue line) is down for the 9th consecutive quarter, ouch.

Secondly, more than half of the volume is made up of mega rounds, meaning early stage suffers.

Thirdly, almost 10% of Q2s volume is made up of xAI’s (Grok/Twitter/Musk) $6bln round. Otherwise Q2 would be weaker than Q1.

You might be wondering whether this is the case across the globe. Well, yes, there isn’t any 2024 data available yet, but you can see a general decline in activity, apart from a couple of tiny ecosystems that still managed to grow.

An interesting case is, of course, Ukraine and Saudi Arabia.

Summary? Winter in full swing tbh, but there are still some winners other that $100m+ mega rounds.

Who is winning at fundraising today?

Even though today’s volume of deals is filled by mega rounds. There are still some types of companies that are winning in fundraising. Let’s look at couple of chart painting a picture of today’s VC world:

First off, quite interestingly, manufacturing, which includes hardware is building its share. This is nicely illustrated by Ares Industries, the first YC Combinator company making offensive weapons. What are they up to you might be wondering? Well, 10x cheaper anti ship missiles 🌚

Enterprise software still at the forefront, but look at more “low tech industries” such as Transportation, Energy & Security gaining ground.

This is important, these categories are getting funded. It will be tough to raise for the next project management software, but if you are in semiconductor industry, you probably don’t have many fundraising headaches.

Choose your product wisely!

I expect Autumn to be stronger in terms of early stage VC funding, no data, just gut feeling. Good luck!

- Slavo