Since 2021, we’ve seen a decline in overall startup funding across all stages. Lower valuations, fewer funding rounds, and stricter financial controls are taking away that startup creativity.
Add rising global tensions and volatile economic conditions and you’ll get uncertain conditions; that said, certain industries like AI continue to thrive.
The following startup trends will give a better idea of what to expect in 2024.
Let’s get started.
Startup Trends to Watch in 2024
The growth of AI-based startups is one thing, but they’re also facilitating M&A activity. The combination of those two is leading to the recovery of investments across the fold.
Here’s how it’s all unfolding.
Half of the best-performing startups in 2024 are AI-based.
Out of the top five best-performing startups in 2024, three are AI-based. (Source)
Every person with an entrepreneurial mindset today starts to develop an AI-based solution for any online market gap they find.
A good majority of these companies come under the definition of AI.
And, with the existence of AI powerhouses like OpenAI, it’s relatively easy for companies to create solutions based on existing architecture.
It says that AI applications that benefit society are not economically attractive to private investors. So, there need to be incentives in place to make such opportunities viable for investment.
Fast-forward to 2024, AI-based solutions have now become prime real estate for startup funding.
So, what changed?
It’s hard to pin this shift on any single event. However, I would say that people’s acceptance of AI in their daily lives has played a massive role.
We went from not letting AI control certain aspects of our online lives to adjusting it in our very strategies. I would say ChatGPT’s role in this shift is significant too.
Personally, I believe we’ve been looking for such AI-powered tools for a while now. I remember more than a decade ago, we used websites like Peter Answers to fool others while hoping there were actual answers on the other side.
Today, we have built-in integrations in our daily apps, such as the Meta AI in WhatsApp.
Collectively, this is now fueling the influx of AI-based startups. Entrepreneurs and founders are taking advantage of people’s acceptance of AI in their daily lives.
And, it’s working.
AI startups have been taking the lead in the startup scene already and I believe it’s going to remain that way (at least for a while).
Singapore is becoming the next big startup ecosystem.
Silicon Valley remains the number one startup ecosystem in the last five years. (Source)
In 2022, Singapore’s global startup ecosystem ranking was 18 and it jumped to number 8 in 2023. Currently, Singapore is #7 globally.
Experts attribute Singapore’s success in the startup world to a strategic position in the Southeast Asian market, along with the country’s pro-business climate.
According to Startup Genome, the value of Singapore’s startup ecosystem is $144 billion.
Singapore has the highest median startup salaries in Southeast Asia. (Source)
Furthermore, while the global average for unicorns (startups with a valuation greater than $1 billion) is 3, Singapore has produced 14 unicorns in the last three years.
On top of that, with an average time to exit of 7.6 years, it’s among the best in the world. The average exit amount is $13.3 billion while the global average is $8.9 billion.
When it comes to industries, Singapore is currently leading the charge in life sciences, cleantech, and big data startups.
This recovery of Singapore’s startup ecosystem is impressive if you know its history. From 2018 to 2020, total startup funding in Singapore dropped from $10 billion to $2.5 billion.
The average value per deal also dropped from S$22.5 million to S$17.3 million. (Source)
However, the PwC report mentioned growing interest in AI-based startups and health and biotech solutions. Today, Singapore’s startups excel in those industries.
A notable unicorn from Singapore is Aspire – a fintech that hit $1 billion in annualized transactions within a year.
However, it achieved profitability in Q3 2023.
The consumer goods sector is gaining popularity in the startup world.
The consumer goods sector accounts for 37% of popularity in the media. (Source)
Data shows that the second-most popular sector in the startup world is the media and entertainment industry.
It currently accounts for 25% of all popularity in the startup world.
A notable startup in the consumer goods industry includes Merama, an e-commerce platform that helps brands grow.
It’s based out of Mexico and has received $160 million in two funding rounds over the last four years.
Another notable startup is Carousell, which is basically eBay for Southeast Asia. It’s a Singapore-based startup and has received almost $178 million over 11 funding rounds in the last 12 years.
Furthermore, a notable startup in the consumer goods industry in 2024 is Curology, a skincare-focused online store.
Some other notable consumer goods startups in 2024 include Bitmovin, Grove Collaborative, and Common.
Moving on, the consumer goods industry is not only doing well when it comes to popularity.
Both the consumer goods and media & entertainment industries are dominating the startup space. (Source)
Generally, if the startup bar is higher than the general bar, it means there’s a lot of startup activity compared to other sectors.
The deals bar indicates how much news is dedicated to actual deals in that sector.
Data from KPMG shows that the consumer goods and media & entertainment industries are the only two where startup activity exceeds general sector news.
More startups will pop up to offer EV infrastructure services.
Total global EV car stock reached 40.5 million by the end of 2023. (Source)
Demand for EVs has skyrocketed in recent years with the US, China, and Europe leading the charge, accounting for 95% of all new EV sales.
An S&P Global report found that EV sales worldwide will increase 13X by 2050. However, despite the massive demand and forecasts, EV makers are having a hard time keeping up with EV sales.
This has reached a point where the largest EV manufacturer today, Tesla has such a massive inventory of unsold cars that it can be seen from space.
EV drivers often have trouble finding charging stations in their area and have to drive miles to the nearest charging station.
On top of that, there’s also the issue of fast-charging stations versus normal charging stations. The former are much harder to find and the latter take way too much time to charge.
These issues have created a market gap that current EV makers are not filling up, paving the way for startups to offer solutions.
For example, ElectroTempo raised $4 million in seed funding in 2023. The startup provides predictions for the total number of charging stations required in an area and provides cost-effective solutions to build them.
The idea is to ensure the maximum utilization of EV charging networks while remaining cost-effective. Another example is itselectric, a Brooklyn-based startup that raised $2.2 million in a pre-seed round in 2023.
The startup specializes in installing curbside charging stations in partnership with local property owners who get paid for the electricity used.
Their vision is to provide sustainable charging solutions for EV users in ultra-urban areas like downtown Manhattan and Brooklyn.
There is an uptick in healthcare startups.
19% of recent media buzz for startups has been around healthcare startups. (Source)
Currently, only one in three Americans (32%) are satisfied with the US healthcare system. 61% agree that navigating the US healthcare system is a hassle while 63% consider it stressful.
53% of Americans feel that the system treats them like a number rather than a person. Only 39% think that the healthcare system works in their best interest.
All this has paved the way for healthcare startups to cash in where the US healthcare system fails a patient.
Some might say billionaires are investing in health tech to improve human life expectancy and longevity.
At any rate, healthcare startups are starting to offer specific services that offer targeted healthcare.
For example, Allara Health was founded in 2019 in New York and it’s a telehealth platform for women to get help related to gynecological conditions.
The startup raised $2.5 million in an angel round and in October 2023, it raised $10 million in Series A funding.
Another example is Komodo Health, founded in 2014 in San Francisco with total funding reaching $514 million. The startup has developed the concept of a healthcare map, that allows patients to map their healthcare journeys.
More recently, AI-powered healthcare startups are taking over. For example, Y-Combinator 2023 startup, Sohar Health, offers AI-powered eligibility checks and insurance discovery for behavioral health providers.
Another interesting startup out of Y-Combinator 2024 is Piramidal, a startup that is creating a foundation model for the brain that will help detect diseases through changes in brain activity.
All in all, healthcare startups will continue to pop up in countries where people are unhappy with the existing healthcare system.
Startup Investment Trends
Startup investment skyrocketed in 2021 as the world was recovering from the pandemic.
With $621 billion in funding across the globe, it shattered all funding records and remains that way today. Here’s where we are today with startup investment.
Digital payments startups are getting more attention, especially from VC firms.
23% of all recent news related to startups has been about digital payment startups. (Source)
Digital payment startups include all startups that either offer convenient online transaction services or investment, repayment, or forex services.
Right now, the global B2B e-commerce industry has a sales value of $28 trillion. The global B2C e-commerce industry is worth almost $4.2 trillion.
And research shows an average growth of 14.2%; which means the demand for payment technology is increasing pretty fast.
Such demand creates market gaps for new payment options, new payment technology, and a need for better infrastructure.
VCs understand that investing in digital payment startups with such solutions today means capturing the market share a year from now, or five years from now.
This doesn’t necessarily mean that they’re investing in startups that are popping up this year. There has been an uptick in new investment rounds for existing startups too.
For example, Toss is a South Korean financial management and payments app founded in 2011. As of 2024, it has received over $1.4 billion in funding (Series G).
Another similar example is Revolut, founded in 2014 in London. Till 2024, the startup has received $1.7 billion in funding.
Revolut has exponentially increased its popularity since last year. In Q3 2023, the company revealed that they have more than 30 million retail customers globally who make around 400 million transactions every month.
Since 2016, VCs have invested over $480 billion into fintech startups, and a good majority of them are digital payment startups.
In 2023, 37.5% of all fintech VC investment was in digital payment startups. (Source)
However, keep in mind that many startups that come into other subcategories also tend to offer digital payment services.
Startup investors remain cautious throughout the world.
There was a 6% increase in VC funding in Q1 2024 compared to Q4 2023. (Source)
After the boost in VC funding in 2021 and early 2022 and the subsequent issues and lessons, VC firms and investors became cautious.
We saw that cautiousness throughout 2023 and current trends show that startup investors are still very cautious globally.
Consider this, since Q1 2018, the first quarter of 2024 was the second-lowest for global startup funding. Meanwhile, Q4 2023 was the lowest in global startup funding in the last six years.
However, despite this slump, seed funding has remained consistent and strong throughout the last four years. It’s still above the global quarterly amounts of 2020.
In Q1 2024, seed companies raised more than $7 billion. This shows that while investors remain cautious, they’re open to investing early.
Moving on, if we focus on the venture dollar volume of North America alone, we see a -27% YoY change but a 14% QoQ change.
In Q1 2024, total startup investment in North America was $35.2 billion. (Source)
Another thing to keep in mind is that historical data shows that Q2 almost always ends below Q1. So we can expect lower overall global investment in startups in Q2 2024 compared to Q1.
However, Q3 and Q4 are likely to bounce back with much more startup investment around the world.
Early-stage investments are increasing and will do so throughout 2024.
In Q1 2024, global early-stage investments totaled $29.5 billion. (Source)
Early-stage investment refers to pre-seed and seed funding (and Series A). While there was a slight slump throughout the quarters in 2023, we’re already witnessing an increase in early-stage investment in 2024 throughout the world.
An increase in early-stage investment despite an overall funding dip shows investors’ commitment to investing in new ideas and tech, especially in the AI world.
According to a report by Innoven Capital – a debt firm based in China, India, and Singapore, 77% of investors believe that the early-stage funding environment will have a higher momentum compared to 2023.
The report also found that investor focus for early-stage investments in 2024 is on DeepTech (45%), generative AI (41%), and ClimateTech (36%).
In comparison, 2023 saw slower early-stage investment activity; that being said, deal sizes were higher and startups had higher valuations, especially compared to 2022.
Meanwhile, the top three sectors with the most investment were B2B platforms, AI, and consumer tech.
There’s a similar trend with early-stage investment in other parts of the world too. For example, PwC New Zealand found that while the sector is going through a tough time, early-stage investments are holding up.
In Q1 2023, total early-stage investment was $182 million while in Q1 2024, it was $163 million.
In the UK, SEIS and EIS provide incentives to angel investors where they get 30%-50% tax rebates. That’s why the UK is the third most valuable startup ecosystem today, worth over $1.1 trillion.
In Q1 2024, early-stage investments in the UK almost reached $1.1 billion. While it’s lower than Q1 2023, it’s higher than Q3 and Q4 2023, showing an increasing interest in early-stage startups.
VCs anticipate a significant increase in deals in 2024.
In 2023, 42% of VCs anticipated inbound deals. (Source)
Due to the drop in overall funding and deals globally in 2023 after the 2021 (and 2022) boom, 69% of investors thought they would be doing the same or fewer deals.
However, today, 89% of investors expect to either do the same or more deals in 2024.
Technological breakthroughs in AI and the introduction of large-scale infrastructure projects in climate tech continue to revive investor interest.
According to Pitchbook, the total deal count in 2023 was 15,766 (13,608 actual plus 2,158 estimated). That number is higher than that of 2020 but significantly lower than the 2021 and 2022 numbers.
On top of that, the combined value of those deals in 2023 was $170.6 billion, $71.6 billion less than in 2022, and $177.4$ billion less than in 2021.
Think of 2023 as the year of normalization after 2021 and 2022. So, overall deal counts and deal values are only expected to improve moving in 2024 and beyond, similar to the trend between 2010 and 2020.
Deal counts are already up from previous years as mentioned before, but what’s important is the total deal value across the fold.
Regardless, current data from PitchBook shows that both deal count and deal value are expected to increase at a steady rate throughout 2024.
Investors and VCs are spending more time researching deals.
Only 3% of investors and VCs spend more than 100 hours researching a deal. (Source)
In 2024, investors and VCs are spending an average of 10 additional hours on deal sourcing compared to 2023.
This is despite the fact that VCs are getting more inbound leads than before. Last year, the average time spent on researching a deal was 34 hours and it has increased to 44 hours this year.
Investors have learned their lessons and have become more thorough in their investigation of new deals.
Some may consider greater due diligence would result in fewer deals, but the opposite is true, as mentioned in the previous trend.
Across the fold, VCs are now priortizing startups that have found a product-market fit who have a solid revenue team and networks that can be leveraged.
Other important factors include determining product differentiation – a startup needs to survive in the long run like any company and for that, differentiation is important. On top of that, a robust value proposition is also key.
The most common form of due diligence is business model viability. A unit economics analysis helps break down revenue and cost into the smallest units possible to check if a business model is viable.
On top of that, VCs also perform risk analysis that determines the timing, execution, product, and regulatory risk.
Accelerators like Y-combinator provide startups with the tools and knowledge to pass these due diligence checks.
Y-Combinator even helped launch a startup called dili which is a due diligence platform that leverages AI to help investors make informed decisions.
So, while investors and VCs are taking more time researching deals, there are startups popping up that intend to reduce that time through AI.
Startup Funding Trends
Macroeconomic factors often dictate startup funding. That’s why it’s better to focus on the type of funding a startup gets.
Right now, 52% of startups are expecting to get venture capital while only 6% are relying on organic growth.
Goldman Sachs and Sequoia Capital are leading the charge as venture capital firms.
24% of all news buzz in the startup industry is attributed to Goldman Sachs. (Source)
Venture capital firms are the backbone of the startup industry. Every country has its own VC firms but some outshine other firms in the global startup arena.
Right now, Goldman Sachs is leading the charge as it accounts for a quarter of all news buzz related to startups.
In 2018 Goldman Sachs introduced a $1 billion commitment called Launch With GS. The idea was to invest in diverse companies that would prove their vision of how diverse teams provide stronger returns.
They focus on investing in gender-balanced leadership, while also investing in diverse partners across VC and private equity companies.
A notable startup that came out of the program is PocketSuite, co-founded by Chinwe Onyeagoro.
PocketSuite was part of the Launch With GS Entrepreneur Cohort. (Source)
The Entrepreneur Cohort offers certain startups 1-on-1 sector-specific workshops, access to influential networks, resources for scaling, meetings with more investors, and business development opportunities.
Other notable entrepreneurs from the program include Helen Adeosun of CareAcademy, Benjamin Hernandez of NuMat Technologies, and Ayesha Ofori of PropElle.
Other than that, most recently, Goldman Sachs also closed its first life science fund with $650 million at the start of 2024, indicating a shift toward biotech startups.
Moving on, the second-hottest VC firm right now is Sequoia Capital. Based in Menlo Park, California, the investment company currently has 1,938 investments in its portfolio.
Most recently, they became the lead investors in Quantum Circuits and Neros Technologies.
They’re currently running a total of 34 funds and the total funds raised has reached $35.1 billion.
While most VC firms faced a fundraising contraction in the past year, Sequoia Capital managed to grow their evergreen fund by 30% to almost $18 billion.
Early-stage funding for AI-related startups is becoming stagnant.
In Q1 2024, $11.2 billion were invested in AI-related startups. (Source)
This does not mean funding to AI-related startups is slowing down; that’s stronger than ever with more than $30 billion invested in 2024 alone until June.
However, the number of funding deals is decreasing, especially in early-stage AI-related startups.
By the end of Q2 2024, total funding deals are expected to reach around 900, compared to 1,052 in Q1 2024. Compared to Q2 2023, that’s almost a 30% drop.
The reduction in the total number of funding rounds and deals is mostly in the angel, seed, and early-stage settings.
Total seed and angel funding in Q1 2024 in AI-related startups was $1.6 billion. (Source)
Seed and angel funding deals account for the most volume in total deals; it’s the reason total deals in AI-related startups have dropped.
Until June, only 423 seed and angel rounds were announced and experts think it will hardly touch 600 by the end of Q2.
That’s a hefty decline from Q2 2023 where there were a total of 779 deals.
And, since seed and angel rounds are smaller in general, the total dollar amount is also expected to be lower.
That being said, the total dollar amount for early-stage funding in AI-related startups is still up. Q2 2024 is expected to reach $10 billion, compared to $6.4 billion in Q1 (and $4.7 billion in Q2 2023).
But, there’s a catch. Recently, xAI got a massive $6 billion round with investment from Sequoia Capital, Valor Equity Partners, and Andreessen Horowitz – that skews the total dollar amount as it makes up for 60% of it.
There’s a steady increase in female investors in 2024.
In 2023, European tech startups raised $56.71 billion in VC investment. (Source)
According to European Women in VC, the number of female investors and female founders is increasing consistently, especially in the European startup ecosystem, most specifically in early-stage settings.
At the same time, there’s also a steady increase in the total number of impact startups. Impact startups include any startup that’s implementing ESG policies.
Right now, 28% of VCs plan on exploring new ESG investment opportunities. Meanwhile, 23% of VCs plan on increasing their portfolio with companies that meet ESG standards.
Furthermore, 38% of VCs say that they’re looking to increase the diversity of their partners.
87% of VCs believe that more diversity in venture capital leads to greater financial returns and better investment decisions.
They also believe that increased diversity means access to a broader talent pool, a more collaborative working environment, and meeting the expectations of relevant stakeholders.
That’s another reason why the number of female founders and investors is increasing.
Right now, female GPs have control of 9% of European VC assets under management. VC funding in mixed teams is at 15% while in female-led startups, the number is below 3%.
For that reason, organizations like European Women in VC are working toward increasing the total number of female investors and founders.
According to the World Economic Forum, women-founder startups account for only 2% of VC funding in Europe and the United States.
However, by VC deal numbers, women founders and investors are gaining ground. Between 2008 and 2024, women-only startups in Europe grew their share of VC deals from 2.7% to 5%.
While there’s a long way to go still, we can expect continuous positive change.
Startup Business Trends
How startups do business varies depending on what kind of startup it is. If you’re looking at a bootstrapped startup, you may find unorthodox business practices.
If you look at venture capital-backed startups, you’ll see a lot more organization.
There’s a steady increase in down rounds globally.
There was a 12% increase in global down rounds between 2021 and 2023. (Source)
A down round is when a startup offers additional shares for sale at lower prices compared to previous financing rounds to bring out the actual valuation of a business.
Inflated startup valuation can become an issue and can be solved through down rounds, but they have their own problems like lower ownership percentages and a negative effect on market confidence.
Perhaps the most notable use of a down round was in 2009 when Facebook was valued at $15 billion after Microsoft bought preferred shares.
Another more recent example of a down round is when Klarna raised an $800 million down round, dropping its value by 85% to $6.7 billion in 2022.
During the startup boom in 2021 and 2022, many companies ended up with high valuations.
Since then, startups have been finding it hard to maintain those valuations, which is another reason that 2024 may see a lot more down rounds moving forward.
Many startups are also decreasing their internal valuation to tackle this issue. For example, Checkout.com decreased its internal valuation in 2022 from $40 billion to $11 billion, further reducing it to $9 billion in 2023.
Another example is Stripe as it cut its internal value by 11% in 2023, bringing it down to $63 billion from $74 billion.
What’s interesting is that Stripe was valued at $95 billion by Sequoia and Fidelity back in 2021. Instacart also cut its internal valuation in early 2023 by 20%, bringing it to $10 billion from $13 billion.
Increased M&A activity in 2024 will normalize valuations.
At least 150 startup acquisitions are expected in 2024. (Source)
With so many startups popping up in 2021 and 2022 as investors got onto the bandwagon, 2023 was a reality check as countless business model issues popped up.
A lot of startups failed to meet expectations, leading to shutdowns or low-value acquisitions.
The same is expected throughout 2024 as large companies will use the opportunity to acquire startups at much lower valuations.
There are a lot of startups out there with good products and teams but inefficient or unproven business models.
So rather than shutting down, investors and founders often opt for mergers or acquisitions to get greater financial stability and access to corporate resources.
In some cases, startups also make certain acquisitions to improve overall value. For example, DocuSign is currently said to be in the process of selling itself to a private equity firm.
At the same time, in May 2024, DocuSign announced that it was buying Lexion for $165 million.
Lexion is a contract workflow automation startup and it will help the launch of the DocuSign IAM service. Experts believe that the acquisition is in a bid to make its own potential sale more attractive.
That being said, not all mergers and acquisitions tend to turn out well. For example, Uber acquired Drizly in 2021 for $1.1 billion.
However, in early 2024, Uber announced that they were shutting down the booze-on-demand service and focusing on Uber Eats.
In 2023, as Shopify shares had a sharp decline, they decided to lay off 20% of their workforce and sell their logistics arm, including Deliverr to Flexport.
According to unconfirmed reports, the deal was priced at a fraction of what Shopify paid for Deliverr.
Expert Insights on Startup Trends
Everyone from startup founders to investors and field experts agrees that AI is changing the startup landscape in various ways.
Many startups are taking the cross-sector approach by offering services leveraging AI tech across multiple industries.
He gives the example of how ChatGPT’s natural language processing model is at the foundation of so many AI startups today.
However, experts also agree that such startups are at a disadvantage when compared to their larger, data-heavy competitors.
As for the general startup community, we’re seeing a push towards urgency and quick learning.
The best advantage a startup has over larger competitors is that startups can experiment quickly, fail fast, and learn.
This helps them quickly learn their customers’ pain points and problems; something that’ll take larger businesses much longer to do, giving startups the opportunity to adapt and take advantage of market gaps.
The startup world is still far away from the 2021 boom but things are normalizing now. Both deal count and deal values are looking optimistic, especially compared to 2023.
Investors and VCs are focusing on generative AI, climate tech, and deep tech.
There are two reasons – one, AI breakthroughs are bound to create a new level of product superiority, and, two, tech advancements translate to robust product differentiation and value propositions.
Meanwhile, VCs are becoming more cautious with improved due diligence checks. At the same time, early-stage investments are increasing at a steady rate.
So, investors are more careful yet are actively investing in new startups which gives us a positive outlook for startup ecosystems around the world.
Mughees is an agile and detail-oriented content marketer and strategist with 3+ years of experience in strategy and management, and 9+ years of experience writing content that converts.
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