The Venture and Tech Ecosystem: A 2023 Review and 2024 Forecast
Mike Cardamone, CEO and managing partner at Forum Ventures, highlights the challenges faced in the struggling venture and tech ecosystem of 2023. He observed a dramatic decline in funding rounds and total investment, with a 64% drop in total rounds and an 86% decrease in total dollars invested in Q1 2023 compared to the peak in Q4 2021. Forum Ventures, having invested in over 100 B2B SaaS companies across their accelerator and seed funds, experienced firsthand how tough the fundraising environment was for founders at all stages.
Michael Cardamone shared thoughts to emerging managers about the state of the market, stating that “this is the hardest it has been to raise a fund in a long time.” With this backdrop, Forum Ventures carried out a comprehensive survey and analysis to provide insights into the current state of the early-stage B2B SaaS investment landscape.
Forum Ventures’ report, based on input from 70 funds and data analysis from 167 pre-seed and seed rounds conducted between January and October 2023, highlights some key findings. 75% of respondents noted a decrease in valuations since 2022 and the data across these rounds showed a 10% decrease from the same survey conducted last year. The mean valuations at pre-seed were $9 million post, and for companies with $250,000 in annual recurring revenue (ARR) or higher, the mean valuation cap was $15 million.
Seed valuations remained stable in 2022 and 2023, yet the bar for achieving necessary traction for these rounds had risen significantly. In the past, $3 million to $5 million seed rounds could be secured with minimal traction, often at valuations between $12 million to $25 million. However, today’s market demands substantial early traction, typically requiring companies to have $250,000 to $1 million in ARR to raise a $3 million+ seed round, usually at 20% to 25% dilution.
These changes have led to a scenario where many founders have to raise a pre-seed round to reach certain milestones and then raise multiple rounds to get to a Series A. The current market requires founders to demonstrate more potential and growth before raising institutional seed rounds.
In conclusion, despite the challenges faced by the venture and tech ecosystem in 2023, there remains optimism for the future. Forward-thinking and strategic approaches will be essential for founders and investors to navigate these turbulent times. Mike Cardamone and Forum Ventures are committed to making the B2B SaaS journey easier and more accessible, providing support and resources to early-stage founders as they navigate the evolving landscape of the venture and tech ecosystem.
