In a recent report, Forum Ventures surveyed 70 funds and analyzed data from 167 closed pre-seed and seed rounds between January and October 2023 to provide a comprehensive overview of the current state of the early-stage B2B SaaS investment landscape.
Key Takeaway
The 2024 venture landscape presents significant challenges for tech founders, with a higher bar for achieving early traction and raising institutional seed rounds. Strategic cash flow management and a focus on building in-demand products are essential for navigating this competitive market.
The State of the Market
The venture and tech ecosystem faced significant challenges in 2023, with a dramatic decline in funding rounds and total investment. Carta revealed a 64% drop in the total number of rounds in Q1 2023 and an 86% decrease in total dollars invested from the peak in Q4 2021. This challenging fundraising environment has impacted founders at all stages of the market, as observed by Forum Ventures, which has invested in 100+ B2B SaaS companies this year across their accelerator and seed funds. Michael Cardamone, CEO and managing partner at Forum Ventures, highlighted the difficulty of raising a fund in this market, stating that “this is the hardest it has been to raise a fund in a long time.”
Key Findings
- 75% of respondents noted a decrease in valuations since 2022, with a 10% decrease in mean valuations at pre-seed rounds.
- Mean valuations at pre-seed were $9 million post, and for companies with $250,000 in ARR or higher, the mean valuation cap was $15 million.
Insights for Founders
Seed valuations have remained steady through 2022 and 2023, but achieving the necessary traction for these rounds has become more challenging. In the current market, substantial early traction is required, with companies typically needing $250,000 to $1 million in ARR to raise a $3 million+ seed round. These rounds are usually getting done at approximately 20% to 25% dilution, highlighting the higher bar for raising an institutional seed round. This dynamic often necessitates raising multiple rounds to reach a Series A.
