Editor’s note: We’ve previously looked at the state of seed-stage investments, including: tendency towards larger seed rounds.
While 2024 was a growth 12 months for enterprise financing, the narrative was not inclusive of seed investments.
Investment in the USA in the seed phase1 decreased barely last 12 months as a result of a sharp decline in the variety of reported rounds, while global financing remained unchanged. While we have seen significant investment in some hot areas, largely driven by the AI boom, this has been greater than offset by declines in other areas.
The decline in seed funding has been particularly pronounced in several industries, including several hit by the disappointing performance of startups funded in recent years. Below we’ll look at 4 of these areas.
Food and drinks
We all have to eat and drink and, anecdotally, most of us appear to spend more on these activities. However, this didn’t translate into strong seed funding around these topics.
2024 US Seed Funding Reported in the Food and Beverage Industry 2 was just $275 million, down 47% from the previous 12 months. This was the lowest annual result since at least 2017, in keeping with Crunchbase data.
Declining investor appetite for alternative protein seed deals was one factor contributing to last 12 months’s weakness. While VCs were bullish on the cultivated meat sector a few years ago, their prospects have deteriorated as commercialization has proven more arduous than optimists anticipated.
Still, we have seen some big rounds for compelling newcomers innovating in food and beverage. Some distinctions include: Aniacreator of the robotic kitchen, Ghosts of sprintersmanufacturer of carbonated drinks with vodka and Davidwhich sells low-calorie protein bars.
Cannabis
Founders and VCs once had high hopes for the possibilities of marijuana legalization. However, cannabis has consistently proven to be a difficult space for startups.
Given the paucity of successful marijuana exits up to now, it isn’t too surprising that seed funding for the space has declined. Still, the scale of the decline is striking, with only $11 million in seed funding reported in North America in 2024. That’s a fraction of last 12 months’s levels and the lowest annual total since 2013, in keeping with Crunchbase data.
So who managed to secure financing? The largest seed rounds included $2.6 million in funding Bliss Coa New Jersey-based craft cannabis brand and a $2 million investment Kiefsoftware provider for cannabis producers.
Virtual reality, augmented reality and virtual worlds
For years, each start-ups and established technology firms have been publishing a picture of a future in which we’ll spend more time in high-tech headsets, interacting in increasingly complex virtual worlds.
This vision has not come to fruition, nor has it generated great returns from funded startups in the space.
Even tech heavyweights struggled. Apple it didn’t make a splash with its pricey Vision Pro headset, which debuted last 12 months and saw slow sales Meta he has largely abandoned his metaversion ambitions.
Seed investors took notice. US startups operating in the space of augmented reality, virtual reality and virtual worlds raised $41 million in seed funding in 2024, down greater than two-thirds in comparison with the previous 12 months. Global investment has also fallen sharply.
The statistics seem a little less grim when you think about that graphics and gameplay for the broader gaming industry are becoming more and more sophisticated. The best ones are capable of provide an experience that resembles entering an alternative reality – VR goggles are not required.
Meanwhile, overall gaming industry seed funding remained strong in 2024, with around $828 million in funding recorded globally, relatively flat year-over-year.
E-commerce
E-commerce is quite a mature industry today, as evidenced by the delivery trucks that repeatedly circle our neighborhoods and the indisputable fact that with just a few clicks you’ll be able to order virtually anything, from dinner to a tiny house.
Despite this, we have long seen solid funding for startups in the space. Historically, investors have a particular preference for offers that expand offerings to underserved geographies and industry categories or improve the purchasing and achievement experience.
Until recently, this was reflected in global seed funding in this space repeatedly exceeding $1 billion. In 2021, greater than $3 billion was committed to space seed deals, and even amid a slowdown in 2023, funding reached $1.2 billion.
However, 2024 was an exceptionally weak 12 months for e-commerce seed investments. Global financing fell 35% year-on-year, reaching its lowest level since 2023.
Investments in the US fell particularly sharply. Just over $200 million was committed to space seed deals, lower than half of the year-ago level.
Still, we saw some big deals being made. There were also larger recipients of financing among American firms G2 Reverse Logisticscreator of returns management software, ArcadeAI platform for creating custom jewelry and Big Sur artificial intelligencewhich offers AI shopping assistants and product recommendations.
Something cyclical?
As the recent 12 months approaches, we’ll be keeping a close eye on whether today’s seed-financed sectors can blossom into hot spots in the future.
To be certain, some industries – food and beverage in particular – are unlikely to stay depressed in the long run. Consumers are at all times looking for tastier, healthier, cheaper and more sustainable meals and snacks, something big brands are slowly delivering.
In the case of cannabis, it is increasingly likely that this has not been a conducive space for ventures, and the legalization and decriminalization of marijuana has not yet paved the way for businesses that can ultimately succeed in public markets.
To look at the seed space from the other side, we will even look at sectors that have seen growth in funding. As chances are you’ll have guessed, artificial intelligence will have a strong presence. Stay up up to now with the rest.