Politics in the driver’s seat

Before diving into the ins and outs of the VC landscape in 2024, there’s one key topic we’d like to address. While undeniably political, the election of Donald Trump in November has already reshaped the global tech ecosystem. The emphasis on deregulation, tax cuts, and immense investments in the tech sector are fueling growth in the American tech industry—particularly in AI. However, the president’s protectionist stance could significantly disrupt global markets, particularly affecting Europe.

As a result, tech investment is set to take center stage on political agendas, as Europe faces mounting pressure to stay competitive. We are expecting to see a surge in regional initiatives or a shift in dominant tech players. Additionally, with Europe being pushed toward greater independence, topics like defense and security will gain more significance.

AI takes over: The defining trend of 2024

Artificial intelligence dominated venture capital in 2024, capturing 35.7% of total global VC deal value. North America saw a 21% increase in AI funding, largely driven by major deals, while other countries lagged behind. This led to a highly concentrated funding landscape, where a small number of AI companies attracted an outsized share of capital, increasing the industry’s exposure to a single sector.

As mentioned in this LinkedIn Post, rising prices and intense competition, particularly in AI tooling and applications, are driving this trend. Deal flow is surging, with many companies experiencing rapid growth. However, the sustainability of this momentum remains uncertain in the coming years.

As mentioned earlier, we anticipate increased public investment in technologies like AI, now a key focus on political agendas. A prime example is France, where private sector commitments totaling approximately EUR 109 Bn were announced during the AI Summit by President Emmanuel Macron, signaling a strong national push toward AI innovation.

Fewer deals, bigger bets

Venture investors became far more selective in 2024, reducing the overall number of deals while concentrating capital on fewer, larger rounds. Global deal count declined, though in the later quarters of 2024 it stabilized again. Instead of spreading investments widely, VCs placed bigger bets on fewer startups, prioritizing those with the strongest traction, particularly in high-growth areas like AI, fintech, and biotech.

This shift was most evident at the late stage, where substantial funding went to extremely large rounds. Even at the early stage, the bar to secure Series A and B funding rose significantly. However, startups that met investor expectations often raised larger rounds than in previous years, reflecting a flight to quality.

Cautious optimism for 2025

Despite the generally tight funding environment, signs of stabilization emerged in late 2024. Investment activity picked up in the fourth quarter, breaking the downward trend of prior quarters and raising hopes that the market may have reached its low point.

There were also early signs of life in exits. While IPOs remained scarce, M&A activity increased as larger companies took advantage of more favorable valuations. If this trend continues, it could restore investor confidence and improve liquidity. Additionally, capital raised in 2021-22 (“venture dry powder”) is still being deployed, helping sustain investment momentum.

As a result, many investors are entering 2025 with measured optimism, hoping for a rebound in IPOs and a more balanced market. While a full recovery is not yet certain, the worst of the correction may be behind us.

Sector shake-ups: Growth areas and pullbacks

Beyond AI, other sectors experienced notable shifts:

• Biotech emerged as a strong performer, accounting for 24% of total venture investment.
• Climate tech and energy attracted major bets, particularly in fusion, nuclear, and hydrogen.
• Consumer apps, crypto, and real estate tech saw significant declines as investor enthusiasm waned.
• Seed funding for food tech, AR/VR, and cannabis tech dropped markedly, reflecting a shift in VC priorities toward sectors with clearer near-term growth potential.

A more selective, strategic market

The venture capital landscape in 2024 was characterized by a reset in investment strategy—leaner, more selective, and increasingly focused on breakthrough technologies. AI remains at the forefront, but investors are also looking toward biotech, enterprise software, and climate solutions as key areas of opportunity.

As we enter 2025, venture capital is adapting to a new normal, where disciplined investment and a focus on high-quality companies will shape the next phase of innovation and growth.

Summary

The election of Donald Trump in November 2024 has already reshaped the global tech ecosystem, with his policies on deregulation, tax cuts, and heavy tech investments—particularly in AI—driving U.S. growth. However, the president’s protectionist stance is set to disrupt global markets, putting pressure on Europe to maintain competitiveness, potentially leading to a surge in regional initiatives and shifts in dominant tech players. Meanwhile, AI continues to dominate venture capital, while investors became more selective, focusing on fewer, larger rounds in high-growth areas like AI, biotech, and fintech. Despite some optimism for 2025, political agendas are playing an outsized role in shaping tech investment, making the landscape far more political than it should be.

VC Deal count recovery in H2’24 across early stages

However, the second half showed signs of recovery—Angel and Series A experienced a slight uptick in deals, Series B remained stable, while Seed saw a minor decline.

Comparing deal counts from Angel to Series B between 2022 and 2024, the sharp decline seen from 2022 to 2023 did not recur in 2024. While overall deal activity still declined, the contraction was notably less severe than the previous year.

VC Deal count dropping across late stages

Looking at the later stages, comparing the last two quarters of 2024 with the same period in 2023, we see a decline in late-stage deal activity, particularly in Q4.

When making a year-on-year comparison, a similar trend as for the early stages is observed: between 2022 and 2023, there was a sharp decline, but in 2024, the downturn was less pronounced, with deal activity stabilizing and holding relatively steady.

Rebound of VC Funding Levels

In 2024, funding levels showed a significant rebound, particularly in the latter half of the year. After a cautious start, capital deployment surged in Q2, and then again in Q4, largely driven by mega-rounds, especially in the AI sector.

In line with this development, in this LinkedIn Post, Andreas Schwarzenbrunner talks about the fact that AI and capital-intensive sectors drive higher capital spend per deal. Even in real terms, median and mean capital per deal have doubled since pre-COVID, driven largely by AI but also extending to decarbonization and other capital-heavy industries.

The final quarter saw an even more substantial increase, with global VC investment hitting its peak for the year. However, this spike was largely attributed to a few large, late-stage rounds, primarily in AI-focused companies, rather than a broad-based recovery across sectors. While the overall deal count for the year declined, the average deal size grew substantially, reflecting a “flight to quality” where investors concentrated their capital on fewer, larger bets in high-potential companies. This trend indicated a cautious optimism as the year ended, suggesting that investors were willing to place bigger investments in established sectors like AI, while remaining selective in their overall approach.

When making year over year comparisons, While we have seen a steep decline for both early and late stages from 2022 to 2023, both early and late stage funding levels have recovered from the steep drop in 2023. Given the fact that investors are more cautious, the increase in late stage rounds was higher than for early stages.

Europe Lagging Behind

VC Valuations finding a new equilibrium

In 2024, venture capital valuations rebounded sharply, hitting new highs across the tech sector. This surge was fueled by investor enthusiasm for emerging tech (especially AI), improved sentiment, and stabilizing economic conditions.

Venture investors remarked on a “flight to quality”, noting that the most promising companies (especially in AI) were commanding competitive term sheets and inflated valuations​ even as lesser startups still faced scrutiny. In sum, a confluence of sector-specific tailwinds (from generative AI to fintech’s rebound and cloud resilience) and a brighter market sentiment helped drive up startup valuations in 2024​, marking a sharp turn from the correction of the prior year.

Selected transaction highlights