The United States: A Brutal Reset
Seed startups in the U.S. are experiencing their most challenging environment in over a decade. Only 36% of startups funded in 2021 progressed to Series A, with the number dropping to just 20% for the 2022 cohort¹. Carta data shows that nearly half of all Series A financings in 2023 were bridge rounds, not new equity-led investments². This has stretched the average seed-to-A timeline from 18 to over 30 months. Institutional capital remains available but highly concentrated. Startups must now meet tighter benchmarks: capital efficiency, margins exceeding 50%, and early signs of scalable product-market fit. VCs prioritise measurable performance.
Western Europe: Pipeline Congestion
Western Europe’s conversion rate has hovered around 20% for over a decade³. In 2023, the region saw a record pipeline of more than 35,000 early-stage companies, all chasing limited Series A dollars⁴. The funding gap persists even with less aggressive valuation drops than in the U.S.. The Atomico “State of European Tech 2023” report confirmed this, underscoring how bridge rounds and extended seeds have become structural components of the fundraising cycle. Syndicate quality and vertical expertise—especially in fintech and deep tech—now separate the funded from the forgotten.
Asia: Investment Reversal
Asia’s venture capital ecosystem entered a period of correction in 2023. Regional funding fell by 38%, reaching its lowest levels since 2015⁵. Early-stage rounds dropped even more steeply, with a 47% reduction in Series A and B capital⁶. Chinese startups are feeling geopolitical decoupling. Indian founders face liquidity shortfalls. Seed-to-A progression increasingly relies on public funds and corporate partnerships. Sectors like semiconductors and energy storage still attract attention, but only if the business case is enterprise-ready.
Sectoral Contraction and Selective Growth
Fintech: From Front-runner to Filtered
Fintech funding dropped to under $40 billion in 2023⁷. Half of early-stage fintech deals were bridges, not fresh institutional rounds⁸. Investors now demand revenue traction, compliance rigour, and retention metrics—especially in consumer plays. B2B fintech and infrastructure APIs are still raising rounds. Blitzscaling has given way to focused capital deployment.
Digital Health: Stabilized but Scrutinized
Digital health saw $10.7 billion in U.S. funding in 2023⁹. That’s down from pandemic highs, but still ahead of 2019. Yet fewer than 20% of 2021 seed healthtechs made it to Series A¹⁰. Investors demand clinical outcomes, payer buy-in, and regulatory clearance. Niche segments—like AI diagnostics and women’s health—still garner checks, especially when paired with longitudinal data and reimbursement strategies.
Climate Tech: High Purpose, Hard Metrics
Only one-third of Series A climate startups in the UK went on to raise Series B in 2023¹¹. Hardware-heavy solutions are under pressure—high burn, long cycles, no revenue. Meanwhile, SaaS models that drive compliance and carbon measurement remain attractive. VCs support climate innovations backed by credible traction.
Capital Dynamics and Strategic Implications
The New Economics of Fundraising
Series A rounds shrank to $6.4 million in 2023, with valuations down 17% from their peaks¹². In Europe, VC fund creation dropped 52% in one year¹³. LPs push for discipline, exit paths, and tighter reserve planning, which results in slower pacing, more concentrated bets, and higher demands on seed-stage traction.
Bridge Rounds as a Survival Strategy
In 2023, 37% of early-stage deals were bridges¹⁴. SAFE notes and internal extensions have become lifelines. Excessive reliance on bridges can lead to cap table congestion and investor fatigue. Strategic use requires clear milestones and an expected lead for the next round.
Strategic Sectors and Investment Themes
AI captured the spotlight in 2023–24. Pre-revenue companies raised $50 M+ rounds for infrastructure bets¹⁵, draining attention from other verticals. Founders in non-AI or non-climate spaces are now repositioned to create thematic relevance.
Metrics That Matter: The New Bar for Series A
In 2024, VCs are rewarding efficiency. For SaaS: $1–2M ARR, 80% gross margins, and sub-2x burn multiples. For fintech: verified transaction volume and retention. For digital health: clinical endpoints and payer contracts. These represent the expected minimum, not stretch goals.
Playbook for Founders in a Compressed Capital Market
(1) Raise early—bridge rounds must be an option, not an emergency. (2) Prioritise capital efficiency: net retention beats raw acquisition. (3) Own the numbers—burn, CAC, and LTV are leadership responsibilities. (4) Align with investable narratives—AI, climate, and infrastructure are high-conviction lanes.
Our View at Allegory Capital
Venture capital is shifting into a high-resolution cycle. Market signals are clear. Advantage lies with teams that act decisively and manage capital with precision.
At Allegory, we favor capital-efficient SaaS, climate-enabling infrastructure, and healthtech built around regulatory credibility. We avoid consumer plays that rely on narrative lift and AI products without core defensibility. We invest in founders who demonstrate control and speed—those who execute with clarity from seed through Series A.
FAQ
What is a reasonable burn multiple for raising Series A in 2024? For Saas and fintech, a burn multiple below 2x is the benchmark. Sub-1.5x is considered excellent.
How long does it take to go from Seed to Series A now? The typical timeline has stretched from 18 months to 24–30 months due to capital constraints and higher performance bars.
Can bridge rounds hurt my ability to raise Series A? Bridge rounds are effective when tied to specific milestones. Repeated use without progress signals risk.
What makes digital health investors say yes in 2024? Clinical validation, regulatory clarity (e.g., FDA pathway), and payer reimbursement are must-haves—point solutions with engagement but no revenue struggle.
How do I reposition my pitch to match VC themes? Connect your core story to strategic trends: e.g., frame your workflow tool as enabling AI productivity, or your sensor platform as part of climate adaptation.
References
- Crunchbase, Seed Graduation Data (2024)
- Carta, State of Private Markets Q4 2023
- Dealroom, European Seed-to-A Conversion Study (2023)
- Atomico, State of European Tech 2023
- CB Insights, State of Venture Report 2023
- PitchBook, Q4 Global VC Trends
- S&P Global, Fintech Funding 2023
- Carta, Fintech Investment Breakdown 2023
- Rock Health, U.S. Digital Health Market Update 2023
- PitchBook, Healthtech Early-Stage Trends (2023)
- Startup Coalition, UK ClimateTech Index 2023
- Carta, Venture Valuation Trends Q1 2024
- Atomico, European VC Fundraising Data (2023)
- Carta, Early-Stage Bridge Round Analysis (2023)
- CB Insights, AI Mega-Rounds Q1 2024
