Gains for Early Stage Investments and AI in North America Q2

Keeping up with trends in the funding landscape is no easy task. But understanding what type of projects are getting funded, and how the market is performing, is critical to your own funding journey. 

As we move through the summer, it’s a good time to take the pulse of what venture capital investments have dominated the last quarter in North America, and what insights we can gain from them.

Let’s dive in.

35% Increase on Last Year

Some cautious good news: Crunchbase reports that overall, $45.3 billion was invested into seed-through growth-stage deals for U.S. and Canadian startups in Q2 of 2024. This marks an increase of 30% from Q1, and a 35% increase from the same time period last year. 

This points to the venture capital market as a whole slowly climbing from its lowest point last year. (Q1 2023 included the $10 billion Microsoft-backed round for OpenAI - with that deal stripped out, the results of Q1 and Q2 would have been much closer.)

We’re also still some way off the record-breaking peak of 2021, attributable to the impact of the pandemic, soaring demand for cloud services, and the opening up of the public markets.

What Areas Are Being Invested In?

Activity across sectors was patchy. Perhaps unsurprisingly, AI is the standout area, totalling $16.8 bn of the overall amount raised. 

The activity here saw some big deals, including Hebbia, which uses generative AI to search large documents with complex information. Hebbia secured $130 million funding, backed by prominent investors including Andreessen Horowitz, Peter Thiel, Index Ventures, and Google Ventures. 

Elon Musk’s Elon Musk’s xAI was another big winner, which accounted for over a quarter of all early-stage funding.

Cybersecurity also performed well, with a robust $4.4 billion invested, however, it saw the lowest number of deals seen in years. With a significant jump in nine-figure rounds, the drop in deal flow can be explained by fewer, but bigger deals. 

Other sectors remained muted, including enterprise software, consumer products, and fintech.

Early Stage v Late Stage Companies‍

Late stage investment saw a slight increase from last year. 

A total of $19.4 billion went into late-stage and technology growth investments – up 11% on the quarter, and 23% year over year.

It was a more confident story with early stage investments. Early stage posted the sharpest gains in Q2 with $22 billion invested, a steep increase of 60% from the prior quarter, and 56% from 2023 levels. 

This should be reassuring if you are at the beginning stages of your fundraising journey - despite the big deal headlines, investors are still interested in finding new innovations in emerging markets and growing companies.

Is Venture Capital Right for Me?‍

Venture capital is just one route to growth, but it works best for companies with existing traction and the potential for rapid growth. 

If you’re concerned that you might not be ready to step into that arena just yet, grant funding could be a great bridging option. Still in the research and development phase? The good news is that federal funding is available to help you get up and running!

Not only is grant funding fantastic for securing investment to progress your innovation, but the process itself can also be extremely helpful in detailing a lot of the information needed to seek VC investment further down the line.

‍SBIR and STTR Grants 

The SBIR/STTR programs offer federal technology grants to small US-based businesses bringing to life amazing innovations that can strengthen America’s economy.