The past quarter was an unusual one for startup funding in North America, with a slowdown in some areas offset by continued strong enthusiasm for artificial intelligence, Crunch Base data shows.
Overall, in the third quarter, the number and volume of funding rounds for North American startups declined sequentially, based on reported investments. However, the tallies didn’t include the massive $6.6 billion in funding OpenAI this was widely discussed in the third quarter but was only officially announced this week.
In the third quarter, investors poured a total of $40.5 billion into startups at all stages. This represents a decline of 10% compared to the previous quarter and an increase of twenty-two% compared to the year-ago level. Late-stage deals saw the biggest gains, while early-stage financings saw the sharpest sequential decline.
For perspective, below is a chart of total investments, color-coded by stage, for the last 11 quarters.
Investments were also spread over a smaller variety of transactions. Known rounds across all stages were around 2,065 for the quarter – down each sequentially and year-over-year.
Contents
Big quarter for AI
Investor appetite for AI deals remained strong in the third quarter, with nearly $15 billion invested in space in North America alone.
That’s barely lower than the previous quarter, but would have been significantly higher had OpenAI announced its latest funding just a few days earlier. Below we present a comparison of investments in artificial intelligence start-ups over the last seven quarters.
Outputs and review
In addition to necessary rounds, the just-finished quarter also provided several good outings.
While the IPO market has not been particularly energetic, we have seen a few IPOs, mostly in the biotech sector. There have also been some big acquisitions for startups in enterprise software, cybersecurity and other areas.
Below we present investment trends at each stage. We also look at the biggest corporate exits this quarter, including mergers and acquisitions and IPOs.
Late stage
We will start with the late stage, which, as usual, consumed the largest a part of the funds.
In Q3 2024, a total of $23.8 billion was committed to late-stage and development technology deals. This represents an increase of 28% compared to the previous quarter and 19% compared to the year-ago level.
The total variety of rounds was 246. This is barely up from the previous quarter and roughly unchanged compared to the third quarter of 2023. Below we show the variety of rounds and total investments for late-stage deals and technology development over the last five quarters.
The increase in total investment was largely due to one transaction – AlphabetJuly’s $5 billion investment in an autonomous vehicle spinoff Waymo. However, because this was classified as a corporate investment relatively than a enterprise capital round, it is not a strong indicator of the broader enterprise financing climate.
However, we also saw more traditional large late-stage enterprise rounds in the third quarter. At the forefront of them was a defense technology start-up On the sensor$1.5 billion Series F in August. Additionally, a legal tools platform based in Vancouver Clio closed a $900 million Series F at a valuation of $3 billion.
Other big deals included: an AI chip company Grokwhich raised a $640 million Series D; creator of cell therapy ArsenalBiowhich secured $325 million in Series C financing; and launch AI coding Magicwhich raised a $320 million Series C round.
Early stage
Early-stage investments declined barely in the third quarter, with total funding at $13.5 billion, according to Crunchbase data. This represents a decline of 39% compared to the previous quarter and is roughly flat compared to last yr. Meanwhile, the variety of rounds decreased barely.
To provide you with a broader picture, below are the total variety of early-stage investments and the variety of rounds over the last five quarters.
It is necessary to note that the strong early Q2 result was largely the results of a single $6.4 billion financing round Elon Muskartificial intelligence startup, xAI. Without this deal, the decline in the third quarter would have been much less pronounced.
Meanwhile, a number of huge early-stage deals were accomplished in the third quarter. By far the largest such round was September’s $1 billion financing Secure superintelligencean AI research lab co-founded by OpenAI’s former chief scientist Ilya Suckew. The round reportedly valued the Palo Alto, California-based company at $5 billion.
Other large rounds included September’s $370 million Series A for the San Diego-based team Honest therapyautoimmune disease therapy developer and July’s $300 million Series A for the Pittsburgh-based company Separate AIcreator of software for powering robots.
Overall, there have been 17 early-stage rounds valued at $100 million or more in the third quarter, most of which went to biotech startups.
Seed stage
Seed investments declined barely in the third quarter, with $3.3 billion invested in nearly 1,207 known rounds. However, we expect the variety of rounds to increase in the coming months as more deals are entered into the database.
Overall, total investment in the third quarter was the lowest in years. Below we present a comparison of the variety of rounds and investment totals over the last five quarters.
MOTHER
Several large acquisitions were announced this quarter in sectors ranging from cybersecurity to biotechnology. Honors include:
IPO
The third quarter was a slow period for technology IPOs, but we did see several biotech debuts, including:
- Bicar therapydeveloper of cancer therapies, went public in September at an initial valuation of $881 million.
- Zenas BioPharmacreator of immunology-based therapies, made his statement public Nasdaq in September, and its recent market capitalization was around $740 million.
- BioAge LaboratoriesThe company, which develops treatments for metabolic diseases based on the biology of human aging, went public in late September and recently had a market capitalization of roughly $675 million.
Big picture
Generally speaking, when we glance back at the third quarter, the adjective “remarkable” comes to mind as more descriptive than common terms like “bullish” or “bearish.”
Venture investors aren’t particularly negative about the asset class, but they have pulled back from once-popular topics like consumer products, e-commerce and so-called legacy cloud. But the AI engine is still evolving, and investor money continues to pile up on the hot names in the space.
The exit environment is not particularly busy, but large M&A deals have not completely dried up, especially for more established startups with breakthrough technology or recurring revenues. And although the technology IPO market stays largely dormant, there is still talk of recovery in the second half of 2025. This is not too distant in terms of the exit horizon.
Methodology
The data in this report comes directly from Crunchbase and is based on reported data. Data is from October 2, 2024.
Please note that data transfer delays are most noticeable in the earliest stages of a enterprise, with seed funding amounts increasing significantly after quarter/yr end.
Please note that each one financing amounts are in US dollars unless otherwise noted. Crunchbase converts foreign exchange to U.S. dollars at the spot rate in effect on the date financing rounds, acquisitions, IPOs and other financial events are reported. Even if these events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historical spot price.
Glossary of financing terms
Effective January 2023, we have modified the way we include corporate financing rounds in our reporting. Corporate rounds are only included if the company has raised seed financing as a part of a series financing round.
Seeds and Angels consist of seed, pre-seed and angel rounds. Crunchbase also includes enterprise rounds of unknown series, equity crowdfunding, and convertible notes with a size of $3 million (in U.S. dollars or a U.S. dollar equivalent) or less.
The early stage consists of Series A and Series B rounds, as well as other sorts of rounds. Crunchbase includes enterprise rounds of unknown series, corporate ventures and other rounds above $3 million and those valued at lower than or equal to $15 million.
The Late Stage consists of Series C, Series D, Series E, and later lettered expedition rounds following the “Series [Letter]“Naming convention. Also included are enterprise rounds of unknown series, corporate ventures and other rounds valued at greater than $15 million.
A technology development is a private equity round led by a company that has previously raised a “venture” round. (Basically any round from the pre-defined stages.)