State of the VC Market: Pre-seed and Seed 2024

Introduction

The global economy has faced significant downturns over the last two decades, impacting startups founders and venture capitalists (VCs) alike. The 1.7% economic decline during the 2008 crisis and the 3.1% decline during the COVID-19 pandemic—the steepest since the Great Depression— fundamentally reshaped the fundraising landscape.

Following the record-breaking highs of 2021 and 2022, the venture market entered a period of correction, marked by a steady decline over the last two years. According to Pitchbook, 2023 fundraising activity barely surpassed 2017 levels, while 2024 is projected to net out below 2016 figures. Early indicators suggest that 2025 could be another slow year for fundraising. 

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To understand how the fundraising market is evolving as we head into 2025, we surveyed 150 active Venture Capitalists in North America, analyzing over 300 B2B SaaS pre-seed and seed deals closed between January and October 2024. Our participants represent a diverse range of roles, including Managing Partners (16%), Partners and General Partners (12%), Managing Directors (11%), Principals (7%), and Associates/Analysts (14%). 

Our analysis examined their three most recent investments, capturing data on industry, geography, traction, and valuation. We also explored investor sentiment on the overall fundraising landscape. We then compared our survey insights with broader market data from leading sources such as Pitchbook, Crunchbase, and Silicon Valley Bank (SVB) in order to provide a comprehensive view of the early-stage funding environment.

This report offers a thorough overview of how investors are adapting their strategies, the key factors they prioritize when evaluating early-stage companies, and the primary drivers behind their investment decisions. It combines quantitative data with qualitative insights to provide founders with actionable guidance as they navigate the fundraising landscape now and into the near future.

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Industries 

As highlighted in our 2023 State of the Pre-seed and Seed VC Market Report, artificial intelligence (AI) continues to dominate early-stage investments, with more than one-third of respondents backing at least one AI startup in 2024, capturing the biggest industry share by far. However, the focus has shifted. In 2023, 14% of respondents invested in Generative AI companies whereas in 2024, investor interest has moved toward vertical AI applications (36.6%), AI agents (22%) and AI infrastructure (29.3%).

This immense concentration around AI is reflected not only in our data but across all external market reports. Silicon Valley Bank’s H2 2024 report shows the median time for a non-AI startup to reach unicorn status is 6.8 years, whereas AI-first startups are achieving this milestone in just 5.4 years. Notably, 30% of these AI-first startups are considered early-stage, highlighting the rapid acceleration of value creation in the space. While deals outside of AI are still happening, they are facing greater scrutiny and longer timelines, making it increasingly challenging for non-AI startups to secure funding in this competitive environment.

“If you are not an AI or biotech startup, it's an incredibly difficult fundraising environment.” - David Lambert, Managing Director, RSCM

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Healthtech and fintech continue to stand out as key areas of investor interest, capturing 12.9% and 9.1% of investments respectively. Other sectors, such as Future of Work (5.3%) and Supply Chain/Transportation (4.3%) are also drawing investor attention. 

James Murphy, Managing Partner at Forum Ventures commented “We are seeing some fatigue in investor appetite across the increasing number of feature-focused point solutions across the enterprise stack, in favor of bigger, harder, and more capital-intensive applications of AI across sectors such as modern manufacturing, intelligent robotics, and aerospace and defense.” 

Our survey also revealed that there is enthusiasm for founders tackling “Bits of Atoms”—software that solves real-world, non-obvious problems beyond the AI hype. 

“We are 2+ years from the ChatGPT moment and incredibly smart founders are figuring out really novel applications of the technology in non-obvious spaces.” - Lucas Perlman, Principal at StandUp Ventures

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Tech Hubs: Geographies 

While California (24%) and New York (15%) still dominate as primary hubs for venture-backed startups, there is a notable geographic shift. Texas now represents 10% of total North American pre-seed and seed investments, a significant jump from 4.2% in 2023. 

Canada is also making strides, with Ontario and British Columbia capturing 7% of total investments. Toronto leads the way,  drawing the majority of funding within Canada. This geographical diversification could indicate that founders are building companies where they can capitalize on unique market-specific advantages like regulatory incentives, tax advantages, and access to specialized talent pools. It could also signal that founders today are increasingly able to successfully fundraise outside of primary technology hubs. 

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Deal Trends

Our survey shows 52% of pre-seed and seed stage companies raised between $1-4M. In comparison, Crunchbase reported the average seed round size was $1M in H1 2024, and Pitchbook reported an average seed deal size was $3M in Q3, highlighting minor variability in deal sizes across sources. 

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In addition to industry and geography, not surprisingly, there is a notable correlation between annual recurring revenue (ARR) and total amount raised across all deals:

• Pre-Revenue Companies: 14% raised less than $500K; 25% raised between $500k-1M; and 23% raised between $1-2M 
• Early ARR (0-50K): 17% raised less than $500K; 15% raised between $500k-1M; 45% raised between $1-2M; and 11% raised between $2-4M
• Moderate ARR (50-250K): 54% raised between $1-4M; 23% raised between $4-7M; and 11% secured raises of $7M+
• High ARR (250K+): 46% raised between $1-4M; 21% raised between $4-7M; and 25% secured raises of $7M+

Larger rounds ($7M+) were predominantly secured by experienced, repeat founders, with  43% of these companies reporting at least $100K in ARR. Seed-stage benchmarks have also shifted upward––$300k-500k ARR is seen as the new standard, compared to ~$200k ARR in 2023. 

Investors are also prioritizing other early traction metrics such as beta testers and early customer validation before considering an investment. From our survey, 31% of respondents reported that founders must demonstrate market and product validation. Investors want founders to demonstrate a deep understanding of their target market and show clear evidence of a significant and urgent problem for a defined customer base. Another 27% of respondents prioritize seeing product-market fit and traction, including clear signs of market pull and a repeatable sales engine.

As Jess Schram, Director of Investments & Incubations at Remedy Product Studio put it, it's becoming “harder for early stage founders to raise, [but] easier for companies who are moving the needle.” Max McAuley, Principal at Ivy Ventures believes that “good deals are still happening––great companies will always receive funding, regardless of the environment”.

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Bridge Rounds 

The path to Series A has become increasingly challenging in a slowing market, stretching the average time between seed and Series A fundraising rounds to more than two years in 2024, up from 1.7 years in 2019.  This has led seed startups to pursue bridge rounds to extend their runway and have more time to build traction and meet the higher benchmarks required for their next major funding round.

In our survey, 36% of investors reported participating in more bridge rounds this year compared to last. Carta’s State of the Private Markets report also reflects a rise in the frequency of bridge rounds year over year, reporting that 40% of all seed and Series A rounds raised in Q3 were bridge rounds––a near-historic high. This reflects the dual pressures of a slower fundraising market and higher investor expectations for Series A+ rounds. To prepare for a longer path to Series A, multiple investors advised founders to raise 24 months of runway and be as capital-efficient as possible since it might be a while before they can raise additional capital. 

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“I think we will continue to see graduation rates from Seed to Series A and Series A to Series B decline,” explains Michael Cardamone, CEO and Managing Partner at Forum Ventures. “AI Agents will make it easier than ever to start a company, iterate quickly on finding product market fit and create early value; which I think will mean growth in company formation over the next couple of years. With that said, I don't think we will see a large increase in the number of Series A and Series B rounds happening, hence creating a decline in graduation rates. This will likely mean there will be a lot of seed-funded companies that aren't quite growing fast enough to clear the bar for a traditional Series A that will have to grow more capital efficiently and potentially leverage debt products along the way.”

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Capital Deployment Strategy 

Several survey respondents highlighted that Limited Partners (LPs) have become over-allocated to venture capital, largely due to prolonged illiquidity in the asset class. Others have pulled back from investing in emerging managers, concentrating their commitments in larger platforms. This shift has disproportionately impacted smaller, emerging funds, making it significantly harder for them to fundraise. Our survey shows that one-third of respondents experienced slower capital-raising timelines from LPs this year. While small M&A is on the rise, large M&A and the tech IPO market are still stalled, exacerbating the liquidity crunch. 

“We as an ecosystem need some large liquidity events in order to see more LP capital flowing into emerging managers,” explains Cardamone. “Once the tech IPO market opens up, which is hopefully in the next 12-24 months, I think we will see improved investor sentiment across the board. This will eventually help open things up at pre-seed and seed as well.” 

Other factors contributing to this shift include political uncertainty, potential regulatory changes, fear of a recession, and high interest rates.

The challenges within the LP landscape create ripple effects for founders.  When funds are slower to close LP capital, their ability to deploy capital into startups also slows. Our survey reflects this, with 82% of respondents believing that changes in their LP fundraising timelines will make it either moderately or significantly more difficult for founders to raise capital in 2025. Many funds are also slowing their pace of deployment—not due to disinterest in investing, but to reserve capital strategically. According to a Carta survey, funds raised in  2022 have deployed just 43% of their committed capital at the 24-month mark—the lowest deployment rate of any analyzed vintage.

Despite the fundraising challenges that investors from our survey are predicting for founders, only 6% reported making significant changes in their own capital deployment strategy. While some respondents noted a shift toward slower dealmaking with larger checks and more ownership, most funds either maintained their existing deployment pace or adjusted only slightly. 

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Valuations

Industry vs Valuation

In addition to deal volume and size, AI startups continue to command inflated valuations, with 62% reporting post-money caps exceeding $10M and 12% surpassing $20M. This includes startups across AI infrastructure, AI agents, vertical AI, and horizontal AI. 

Healthtech follows closely with 56% of companies reaching post-money caps of over $10M. In comparison, 35% of fintech companies captured in the survey reported post-money caps exceeding $10M, and 64% of supply chain companies achieved a post-money cap of over $10M.

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“AI startups are defying valuation norms and investment pacing. Valuations are significantly inflated and it will be difficult for companies to grow into their valuations if growth starts to plateau.” -Brian Gong, Senior Associate at Cameron Ventures

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Traction vs Valuation 

At pre-seed and seed stages, valuations have become more nuanced in 2024 as the market corrects from the 2021 funding frenzy and subsequent downturn in 2022 and 2023. While competitive deal dynamics remain a factor for pre-seed and seed valuations, our data shows a correlation between traction (ARR) and valuation:

• Pre-Revenue Companies: The majority of pre-revenue companies fall within the sub-$10M valuation range, with 22% valued under $5M and 40% between $5–10M. 
• Early ARR Companies ($0–50K): Among companies with early revenue, 39% are valued within the $5–10M range, with a notable 25% reaching valuations of $10M to $15M. 
• Moderate ARR Companies ($50–100K): Valuations shift upward in this range, with 38% of companies achieving valuations between $10M and $15M, and 22% reaching $15 to$20M. 
• High ARR Companies ($250K+): Valuations jump significantly for companies with more than $250K in ARR, with 35% valued over $20M and only 10% below $15M. 

Investor sentiment reflects this trend, where numerous respondents advised founders to focus on customers, gaining some traction and strong growth metrics before going out to fundraise.  As one investor put it, “Focus on clear, strong differentiation and the "right to win" and "right to survive"".

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Product Stage vs Valuation 

Additionally, product maturity influences funding potential:

• Pre-Product: 38% of pre-product companies secured valuations below $10M. These companies typically need to rely on exceptional founders, a highly compelling vision, or strong narratives to secure funding. 
• MVP-Stage: Among companies with a launched MVP or beta testers, 31% achieved valuations between $10M and $15M. These companies can command higher valuations if they demonstrate early signs of product-market fit through beta users, design partners, or initial adoption metrics.
• Mature Product in Market: 59% of companies that were scaling secured between a $10-20M valuation.  These companies typically have a mature product that has progressed beyond the MVP stage, with clear validation of their business model and early signs of revenue growth.

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Geography vs Valuation

Major tech hubs like San Francisco, New York, and Boston continue to see higher valuations and larger raises due to deeper investor pools and more competitive deal-making. 

According to our data, 66% of companies in primary tech hubs like California (San Francisco and Los Angeles) were valued at $10M or more, with 15% surpassing $20M+. Similarly, 68% of companies in New York were valued at $10M or more, while 11% surpassed $20M. In contrast, Texas, while emerging as a tech-hub and showing strong funding, has yet to see ultra-large valuations common in California and New York. While 53% of companies in Texas were valued at $10M or more, none reached the $20M+ mark, and a significant portion (36%) were valued between $5M and $10M.  In Toronto, 78% of companies were valued at less than $10M. 

Startups in emerging hubs like Texas or Toronto may face lower valuations due to smaller investor pools and less competitive deal-making. However, these markets often draw more attention from regional investors with specialized expertise or local focus. While regional ecosystems may lack the density of resources of major hubs, they offer lower costs and opportunities for early-stage founders to extend their runway. 

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The Founder

According to our survey, 70% of investors ranked the founding team as the most critical factor in their decision-making process, far surpassing other considerations like traction (15%), product (8%) and business model (5%). When asked what the most important founder quality is that investors look for, grit and resilience (24%) and strong ability to execute (15%) were the most valued.  

“The founder has to demonstrate leadership and adaptability,” says Rich Maloy, Managing Partner at SpringTime Ventures. “The journey from 0 to 1, 1 to 10, 10 to 100, and on, requires new skill sets at each stage. The CEO must be someone we can believe in for the long term.” 

Investing at pre-seed and seed is inherently risky. Even with a few hundred thousand in revenue, success is far from guaranteed. At this stage, the founders and their team are critical in determining a company’s potential. 

Our data shows that first-time founders typically secure lower valuations, ranging from $3M to $10M. This is especially true for companies that are pre-revenue, or in the early-traction stages. On the other hand, multi-time founders, particularly those with past successful exits, often raise at valuations between $15M to $20M+. 

“LPs are deploying less capital into emerging fund managers and generally concentrating capital into a smaller set of more established funds. There will always be capital at the pre-seed and seed stage for "proven" founders. Still, the reality is that most founders are unproven, first-time founders.” explains Michael Cardamone, Managing partner of Forum Ventures. “Traditionally, emerging managers are the funds willing to take pre-seed risk with unproven founders and if a lot of them go away over the next 24 months, it will likely mean there is less capital going into those rounds and the unproven, first-time founders will have to prove more with less to fundraise successfully in this market. Proven founders (ie. 2nd-time founders or senior executives at well-known high-growth late-stage startups) will have a much easier time raising seed capital. However, they will still need to show meaningful growth and revenue traction in most cases to raise a Series A.”

While prior experience can provide an advantage, it is not the sole determinant of success. Several of today’s most prominent unicorn tech companies were started by first-time founders, including Airbnb, Stripe, Pinterest, Instacart, and Zoom, to name a few.

Founders who haven’t had venture experience of a successful exit are still able to raise if they can effectively demonstrate a strong vision and a team with deep domain experience, drive and resilience.  

For investors, this underscores the importance of evaluating founders not solely by their past ventures but by their founder-market-fit and potential to navigate challenges.

“Show you don't need to wait for capital to make progress. Demonstrate resourcefulness and make that a super power that stays with the company forever.” - Lucas Perlman, Principal at StandUp Ventures

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Underrepresented Founders 

While total deals being done are down year-over-year since 2021, the market continues to affect minority founders within early-stage investments disproportionately. Our survey reveals that of all the investments made in 2024, less than 25% went to female/ non-binary, LGBTQ+, or BIPOC founders or co-founders. Capital continues to flow to non-diverse founders, leaving these groups vastly underrepresented. 

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According to Pitchbook-NVCA’s Venture Monitor report, only 22.4% of VC deals had female founders in 2024, compared to 24.5% in 2023. While funding for female founders and co-founders increased year-over-year from 2021 to 2022, it has declined in subsequent years, reflecting a troubling reversal in progress. 

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Addressing these disparities will require intentional action across the ecosystem, from prioritizing diverse deal flow to challenging biases in investment decisions. Without systemic change, these gaps are unlikely to close at the pace required to create an equitable funding landscape.

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Conclusion

Raising capital in 2025 will require patience, focus, and excellent execution. The economic slowdown and cautious capital deployment from both VCs and LPs are creating longer timelines and a higher threshold for fundraising. Still, investors remain eager to back exceptional founders who demonstrate strong execution and market understanding. For founders to meet new investor expectations, focus on fundamentals, demonstrate founder-market fit, and execute efficiently. Early ARR, customer validation, and a solid go-to-market strategy are no longer just helpful—they’re essential to secure funding and command higher valuations. Equally important is crafting a compelling narrative that articulates why your team, product, and vision are uniquely positioned to solve a market problem and execute quickly. This can be the difference between a lukewarm response and securing that pivotal check.

The rise of bridge rounds and sustained interest in pre-seed and seed investments reflect a belief that startups addressing real-world problems with scalable solutions can thrive. In the current market, founders should prepare to extend their runway to account for slower deployment rates and meet the heightened requirements for their next raise. 

Moreover, the shift to targeted, high-impact opportunities demonstrates that strategic founders who solve pressing challenges will continue to stand out. AI startups continue to outpace other industries, commanding higher valuations and shorter timelines for success. However, the shift toward vertical AI applications and industry-specific solutions highlights opportunities for differentiation within the AI ecosystem. While healthtech and fintech remain key areas of investment, founders outside AI should emphasize solving unique, real-world problems to attract attention. 

For investors, 2025 is an opportunity to double down on the next wave of transformative companies. By balancing caution with conviction, the venture community can ensure the ecosystem continues to thrive amidst current market conditions, driving both financial returns and impactful change. 

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Appendix: Tips for Founders Raising Capital in the Next 6 Months

1. Focus on Product-Market Fit and Traction

• Demonstrate early signs of product-market fit (PMF) with evidence from customer feedback, early revenue, or user growth.
• Aim to have at least an MVP and real market traction before fundraising, unless you have a unique, world-class expertise (e.g., in AI).
• Prioritize early customer wins and paid pilots to show market validation.

“In the current market environment, pre-seed and seed founders should focus on demonstrating clear product-market fit and a sustainable path to profitability, as investors are becoming more cautious and selective with their capital. Emphasize traction, whether it's user growth, revenue, or partnerships, to showcase the viability of your business model. Strengthen your pitch by highlighting a resilient team with the ability to adapt, and be prepared for deeper due diligence and longer fundraising timelines. It's also wise to extend your runway by managing expenses carefully, as this not only buys you more time but also signals fiscal responsibility to potential investors.” - Zach Rubin, Las Olas Venture Capital (LOVC)

2. Highlight Team Strengths and Execution Ability

• Emphasize the resilience, adaptability, and experience of your founding team—these traits matter more than ever in a volatile market.
• Demonstrate your track record and ability to execute, especially if you’re a first-time founder.
• Investors are placing a premium on founders who show perseverance and a deep understanding of their market.

• Investors want to see that you’ve de-risked the venture through real-world validation rather than relying on theoretical assumptions.

“Think of your raise like a science experiment. Start with your unique insight, use it to form an hypothesis, then explicitly use the proceeds of your raise to conclusively prove or disprove that hypothesis before raising more money.” - Zach Magdovitz, Co-Founder / Partner at Lorimer Ventures

3. Be Capital Efficient and Raise for Long Runway

• Plan for 18-24 months of runway to allow for pivots and reduce fundraising pressure.
• Be patient and persistent; fundraising can take 6+ months, so give yourself plenty of lead time.
• Show resourcefulness by making progress even with limited funds. Proving capital efficiency is key in today’s cautious market.
• Prioritize extending your runway with careful expense management, giving you time to validate your model and iterate.

“1)Raise 24 months of runway, factoring in that you are going to hire a team and pay yourself if you aren't already. We (VCs) want founders to be compensated for their hard work, even if it's only enough to pay the bills.  In general, I have seen so many companies raise too little and then their time is just spent fundraising as opposed to growing the business. 2) Raising capital from VCs is as much as you choosing them as we are choosing you. Be mindful that these are long relationships and you want people who truly believe/will add value (which sometimes is just acting as a sounding board) or stay out of your way if they can't. 3) Validate what you are doing. The point of validation is not to prove you are right, but to figure out where you are wrong so you can fix it early.“ - Xavier Friel, Senior Associate at Plain Sight Capital

4. Cast a Wide Net and Start Early

• Build a large pipeline of potential investors and nurture these relationships before you need capital. Nurture these connections so that when you do start your process, there’s already a foundation of trust and familiarity.
• Fundraising is a process—map out your target investor profile and reach out early to build familiarity and momentum.
• Run a tight, structured process with clear timelines, working backwards from your target close date.
• Remember that raising capital is a two-way street. Seek investors who truly believe in your vision and will add value beyond the check. Prioritize partners who will either support your growth or stay out of your way when needed—this is a long-term relationship.

“Both in our direct experience and in broader industry data, it’s clear that the VC market is consolidating across all stages, which reduces the number of potential investors for founders. Given this changing dynamic, it's more important than ever to ensure that you're thoughtfully approaching relationship-building, understanding the appropriate milestones, and positioning your company for long-term success. Our typical advice remains more relevant than ever: plan for 6-9 months of the fundraising process, and build a fundraising process that sets you up for success. In short: 1) build a pipeline of relevant prospective investors; 2) establish familiarity with and/or access to these investors; 3) prepare your materials; and 4) run a tight process with momentum and intentionality.” - Geri Kirilova, Partner at Laconia Capital 

5. Set Realistic Expectations on Valuation

• Be reasonable with valuation expectations, focusing more on securing the right partners than optimizing for the highest valuation.
• Investors today are more selective; focus on demonstrating strong fundamentals rather than relying on speculative growth projections.

6. Tell a Clear, Compelling Story

• Craft a narrative that clearly articulates the problem you’re solving, your unique solution, and your go-to-market strategy.
• Highlight your “unfair advantage” or differentiation—why your team is uniquely positioned to win.
• Be transparent about your challenges and honest in your pitch; intellectual honesty builds trust.
• Focus on clear, strong differentiation and your “right to win.” Show why your company stands out in a crowded market.

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