USA Trends and Developments Contributed by: Frank Cannone, Michael Lubben, Peter Flägel and Thomas Rezach, Gibbons P.C.
The Venture Capital/Emerging Companies Market in the USA: an Introduction General observations The venture capital (VC) market remains com - plex and dynamic, with there being some hope that it is set to grow significantly in 2025. As in previous years, founders and investors will continue to face numerous challenges. Howev - er, understanding the latest market trends and developments may increase the probability of success for all parties involved. The venture capital landscape in 2024 was a tale of two contrasting developments, marked by both significant growth and large uncertainty. Investments surged in Q2 2024, reaching a peak of USD94 billion, representing a 5% increase from Q1. However, this growth ceased and plummeted in Q3, which saw a 16% decrease from Q2. Global technological innovation and macroeconomic trends strongly influenced the volatile venture capital market trends shown by these figures. With the ongoing development of artificial intelligence (AI), it is likely that the global VC market will continue to navigate these dual forces in the coming years. The pace of financing transactions in 2024 was distinctively slow when compared to the pletho - ra of oversubscribed rounds from the pandemic years. However, the distribution of VC invest - ments revealed certain trends in 2024 that resulted in an upswing in VC activity surround - ing start-ups. Compared to 2023, seed transac - tion sizes increased by 35%, while early-stage investments grew by 14%. This activity shows that investors are willing to back innovative ideas and promising start-ups from an early stage. With regard to late-stage financings, however, 2024 initially experienced decreases in the early quarters. Late-stage financings finished strong,
however, as companies returned to market to raise new financings. In line with these trends, the time between rounds for all series hit decade highs in 2024, with the Series C and Series D+ rounds passing two years from the date of pre - vious investment rounds. Despite the bounce - back, late-stage deal activity declined for a third consecutive year. The bulk of “deal value” in 2024 was dominated by AI-backed companies, which were the pri - mary drivers of increasing deal sizes and valu - ations in 2024. Out of the USD74.6 billion in deal value generated in Q4 2024, 43.2% can be attributed to the five largest deals (46.4% of 2024’s deal value consisted of AI-backed com - panies, including these top five deals in Q4). Fur - thermore, looking at deals for USD500 million or greater, 15 deals comprised 54.4% of Q4’s deal value. These numbers show two things: • the venture capital landscape has become quite concentrated (and should continue to be in 2025); and • the presence of AI-backed companies could be providing “false” sense of growth in the market. The number of “unique” investors in this space remains higher than pre-pandemic. Whether this is because of promising technology or investors being influenced by a fear of missing the next “big” technology wave, AI dominated the nar - rative in 2024 and will likely continue to do so in 2025. Most venture-backed start-ups will need to raise capital in 2025. Generative AI and machine learn - ing businesses are poised to continue to trans - form various industries by offering new solutions to operational processes. As shown in the figures above, AI has rapidly become business essen -
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