The startup ecosystem is evolving and adapting to new challenges and opportunities. In this post, we’ll cover the state of play and the key investment trends shaping the international early-stage startup landscape in 2023-2024. We’ll also share actionable advice on conquering 2024 with your startup company.
General international early-stage startup investment trends
There are several trends related to startup investing in general for 2024. Here are the most important ones:
#1 The impact of AI and machine learning on startup funding in 2023–2024
2022 was a year marked by a sharp spike in investment in metaverse technologies after Facebook rebranded to Meta in October 2021. But investment in artificial intelligence (AI) dominated the tech sector in 2023 after ChatGPT’s release in 2022.
Throughout 2023, AI and machine learning (ML) have transformed various industries. This trend will only get stronger in 2024. Many startups that leverage AI to create innovative solutions are attracting more funding from investors.
MarketsandMarket values the international artificial intelligence market size at $150 billion in 2023. Growing at a compound annual growth rate (CAGR) of 36.8%, this will reach $1.35 trillion by 2030.
A good part of that growth comes from strong investment in early-stage startup companies in the AI space. In this sense, Crunchbase reports an investment of $84 billion in 8,299 funding rounds for 2,515 startups.
Most of this funding came from Series A and Series B funding rounds led by venture capitalists (VC) and micro-venture capital investors, accelerators, angel investors, and incubators.
B2B AI Solutions
One of the most significant trends in AI for the coming year involves B2B solutions to improve or automate business processes to enhance the user experience. Glassbox exemplifies this with its session replay tool.
Leveraging session replay in early-stage startup websites or platforms can offer insights into user behavior. These insights help startups improve their user experience.
Startups can improve their product or user interface by using session replays. Investors seeking scalable and user-friendly innovations find this appealing. It’s a win-win.
#2 The growing importance of ESG factors on startup funding in 2023–2024
Environmental, social, and governance (ESG) factors are becoming more influential in the startup funding landscape. According to a report by PwC, over 60% of people based their investing behavior on ESG factors in 2023. That trend is set to continue throughout 2024, growing every year by as much as 10%.
Key takeaways for early-stage companies on ESG factors
By 2024, startups that have similar values to ESG principles will find it easier to get funding. They’ll enjoy more access to capital, lower costs, higher valuations, and stronger customer loyalty. But implementing ESG principles goes beyond going net zero. According to the PwC report, the top five areas ESG startups should focus on are:
- Ethics and integrity
- Supply chain security, resilience, and transparency
- Fair workforce transitioning
- First Nations inclusion and empowerment
- Adaptation to an expanding regulatory landscape
#3 The emergence of new market segments
As technology and consumer preferences evolve in 2023, new market segments emerge. These markets offer new chances for companies to create value and solve problems. Some examples of startups exploring new market segments include:
Life science and biotech startups
Biotech startups are pushing the boundaries of life science and technology. They are creating new solutions for fields like healthcare, agriculture, and others. These startups use advanced techniques like gene editing and bioinformatics to address unmet needs and challenges and, therefore, address new markets.
Some top biotech startups to watch in 2024 include:
- Cellino, a nano-biotech company based in Boston, Massachusetts, that works on stem cell research. Cellino’s mission is to democratize stem-cell-based treatment of different diseases. So far, the company has received $100+ million in five funding rounds, the last of which was a Series A funding round.
- Prellis Biologics, a bioprinting and tissue engineering company based in Loos, France. The company is developing artificial tissues for organ transplants and skin grafts. So far, it has received $65 million in Series A funding and is offering pre-IPO options for investors.
- Ginkgo Bioworks, another Boston biotech startup. Ginkgo has raised over $800 million to finance the development of custom-tailored microorganisms for different industries. These include the food, health, and energy sectors, among others.
New wave of fintech startups
Fintech startups have been disrupting the financial services industry for some time now. They offer innovative and accessible solutions for payments, lending, investing, insurance, and more.
Startups in the fintech space leverage technologies such as blockchain, AI, and cloud computing. By leveraging these technologies, they create more efficient, secure, and inclusive financial systems.
Some of the top fintech startups to watch in 2024 include:
- Wise, formerly known as TransferWise, a UK-based fintech specializing in cross-border money transfers.
- Chime, an online bank that offers different types of accounts and credit cards. Chime’s value is over $25 billion and recently raised $750 million from a secondary market round.
- Stripe, a privately-held fintech company that offers online payment processing for e-commerce companies. Stripe was the most valuable startup in the US in 2021, reaching a jaw-dropping $95 billion. In 2023, the company raised a total of $6.5 billion.
Non-dilutive funding trends in 2023–2024
Non-dilutive funding is a form of financial support for a business that doesn’t require relinquishing company ownership. This type of funding is attractive for early-stage companies that want to control their company fully and avoid diluting their equity.
Non-dilutive funding also offers:
- Lower cost of capital
- Greater flexibility
- Higher valuation
Non-dilutive funding can come from various sources. Some examples of external funding include private or public grants, pitch competitions, accelerators, incubators, and crowdfunding.
Over $50 billion is available in non-dilutive funding
The non-dilutive funding landscape is large. Startup Fund Hub says over $50 billion is available in non-dilutive funding opportunities in 2023. For example, the NIH small business programs will set aside $1.3 billion in funding for life science startups in 2024.
Venture capital investment trends in the startup ecosystem in 2023–2024
Venture capital (VC) investment is a type of equity financing that involves providing capital in exchange for a stake in the company. VC deals can help startups access expertise, mentorship, and networks.
They can also validate a business’s product and market potential. However, VC deals dilute the founders’ ownership and control of the company. They also impose certain terms and conditions on startups.
VC funding makes up mega-round VC deals and early-stage and seed-round funding. Let’s look at trends in these two sectors.
Mega-round financing in 2023–2024
Mega-round financing describes financing rounds that exceed $100 million in size. Late-stage startups usually raise these rounds with a proven product-market fit.
A marked trend this 2023 has been a general continued drop in mega-round financing in the startup world. From Q1 to Q2, mega-deals dropped from $40.6 billion to $27.6 billion.
Comparing Q1 2022 to Q1 2023, the year-over-year drop was staggering, falling by over half from $81.9 billion. The year-over-year difference in Q2 was even worse, reaching 55%.
Yet, while still below 2022 levels, mega-round financing is beginning to stabilize. It recovered slightly to $33.3 billion in the past quarter (Q3), then fell back in October, according to CrunchBase.
Though VC dollars have declined, there are signs of life in early-stage activity
In 2023, there were significant decreases in late-stage, mega-round, and seed funding. However, that fall is slowing down and shows signs that it could bounce back in 2024.
This trend tells us that 2024 will be a good time to start a new business in the life science and fintech sectors.
Crypto startup funding trends in 2023–2024
Crypto startup funding can take various forms, such as:
- Initial coin offerings (ICOs)
- Venture capital (VC) funding
- Decentralized autonomous organizations (DAOs)
Investing in crypto startups was all the rage in early 2022. That year saw a peak of 80 emerging crypto startups per month in January. However, things changed in 2023.
TechCrunch reports that Q2 only saw $2.34 billion invested in the crypto startup space, while in Q1 2022, it peaked at $12.14 billion. In the second quarter of 2023, there was a decrease in investing in cryptocurrency for the fifth time in a row. Many people believe that this heralds the end of the cryptocurrency market.
Crowdfunding for early-stage startup trends
Crowdfunding means raising capital for a venture or project from many investors through an online platform. This is a method to make private investing accessible and fair. It also helps new companies raise funds quickly and easily.
The most popular online platforms where companies seek crowdfunding are:
Crowdfunding has been a popular way to fund startups in the past decade. The number of crowdfunding campaigns peaked at 155,800 deals in 2021. In 2023, the deal count declined to 151,100. The trend of declining deal counts will likely continue through 2024.
The average value of these 150K deals is roughly $8,000 and will likely remain the same throughout 2024. So, crowdfunding is a smart choice if you plan to start a company in 2024 and only need around $8,000 to get it off the ground.
Tips for early-stage startups to survive and thrive in 2024
Tip #1 Fund your startup through crypto lending
International startups often struggle to find funding, but crypto may offer a solution. Financing in crypto offers a more attractive alternative for investors. While cryptos are generally used to pay for services, they’re also useful for raising capital. These options serve to attract investors’ attention and thus ease startup financing.
However, funding your startup in crypto comes with some challenges. For example, you must learn to report crypto taxes to the relevant authorities. Otherwise, you may encounter legal issues down the road. In short, you must ensure compliance with local laws and regulations related to doing business in crypto.
Tip #2 Invest in mental health plans for your employees
A popular trend in investing for startups around the world is to fund mental health plans for their employees. This means planning and providing financial support for mental health services.
Many companies, like Unilever and Union Pacific, are embracing the health and wellness trend. This is because both potential and current employees find it very attractive. Here’s why:
- Employee Well-Being: Mental health is a vital component of wellness. Forward-thinking startups recognize that employee well-being extends beyond physical health. Providing accessible mental health support promotes a more productive and satisfied workforce.
- Attracting Top Talent: Startups that invest in mental health plans set themselves apart in the competitive job market. Therefore, they make it easier to attract and keep the best talent.
- Enhanced Productivity: By addressing mental health, startups can reduce absenteeism and stress. This leads to increased efficiency and better business outcomes.
Tip #3 Network at events and conferences (it still works)
Startup funding often comes from investors we meet during trade shows, conferences, and other events. 2024 will see many such events, like the 19th Annual Non-Dilutive Funding Summit.
Digital business cards, like Mobilocard, help startups show investors who they are. They are a flexible way to share information and make a good impression.
These cards can include links to essential documents such as pitch decks or websites. With a quick scan, startups can provide investors with immediate access to their critical information.
Tip #4 Leverage offshore asset protection trusts
In investment trends in the international early-stage startup ecosystem, establishing offshore asset protection trusts is one intriguing avenue gaining traction. These trusts offer investors security and legal protection for investing in startups abroad.
One advantage of offshore asset protection trusts is shielding assets from potential litigation and creditors. This protection provides an excellent safeguard for investors’ capital. Moreover, it can offer tax benefits, making it an attractive option to optimize financial portfolios.
2024 looks shinier than 2023
The above trends point to 2024 as a year where VC investing will stabilize and possibly bounce back. Also, there will be $50 billion in non-dilutive funding up for grabs for eligible startups. AI startups will be the main drivers behind the early-stage startup ecosystem in 2024. However, funding will also skew towards biotech and fintech companies as well.
Startups from other sectors of the global economy that don’t require hundreds of thousands of dollars may consider crowdfunding. Short of bootstrapping your new startup, crowdfunding is the easiest way to raise the average amount of $8,000.