If you’re having a hard time raising money, you’re not alone. Venture funding fell by half in May compared to the prior year.
From a report by S&P Global Market Intelligence:
Venture capital investments worldwide dropped 47.8% year over year in May to $18.85 billion from $36.08 billion, according to S&P Global Market Intelligence data.
The number of funding rounds slumped 38.9% to 1,129, from 1,847 a year earlier.
One bright spot: funding actually jumped a little from the April doldrums:
May totals increased slightly from the previous month, when $16.52 billion was raised across 1,057 venture capital-involved funding rounds.
Here’s what I’m seeing in the market…
Companies without AI at the core are struggling to raise. Especially at Series A, valuations for non-AI companies are extremely low.
For founders, this can be dispiriting.
But as an investor, I view this as a great opportunity. I’m doubling down on some of my most successful companies at rock bottom prices!
Even for AI startups, fundraising can be difficult.
Huge slugs of capital are going into a couple of companies like OpenAI and Anthropic. For everyone else, pickings are slim.
A lot of investors are sitting on their hands. I see only about half as many deals as I did at the peak market.
Many minority investors are waiting for a big name like Sequoia to come in. Only the strongest of signals gets them to open their wallet.
I don’t operate that way. I make my own decisions, and the reputation of the other investors is a very minor factor.
But even I have slowed down my investment pace so far this year. Fewer deals to choose from means fewer deals that I like.
Soon, I think some great startups will emerge at the AI application layer. I’m excited about companies that apply AI to an industry to make 10x better software.
Imagine AI tools for buying and selling derivatives, for example. You could describe the risk you’re seeking to hedge and AI could show you the perfect derivative to buy at the best possible price.
Startups like this will have more defensibility than another chatbot or copywriting app.
I expect to see this new generation of AI-enabled SaaS companies later in the year. When that happens, I hope to ramp up my investment pace.
If you’re struggling to raise, my advice is to extend runway and get to breakeven ASAP. It’s hard, but it’s the only way to survive.
What are you seeing in the fundraising market? Leave a comment and let us know!
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