Updated: 2026-07-07

The 2022-2023 venture capital winter left real marks: fallen valuations, down rounds, startups closing, and a broad posture of caution after the 2020-2021 boom. Entering 2024, things are moving, but unevenly. Generative AI absorbs a disproportionate share of capital. Other sectors remain slow. This article breaks down where money is going, what investors expect now, and how to prepare a raise in this context.

Key takeaways

  • The VC market in 2024 is better than 2023 but still demanding: 3-6 months due diligence, less favourable terms, lower multiples.

  • Generative AI, climate tech, and defence attract disproportionate attention; consumer, crypto, and DTC remain depressed.

  • "Burn multiple" is the new central metric: burn / net ARR added; 2x acceptable, 1x good.

  • Due diligence now includes code review, calls with ex-employees, and exhaustive unit-economics analysis.

  • A well-run round takes 3-6 months in this environment; the "raise in 3 weeks" era is past.

The general state in numbers

PitchBook data sets the context:

  • 2021: record year, $621B global VC.

  • 2022: drop to ~$483B.

  • 2023: ~$345B, lowest level since 2018.

  • Q4 2023 / Q1 2024: signs of selective recovery.

What those numbers mean in practice: funds have capital (dry powder exceeds $300B), but fewer deals close. Those that do close face more scrutiny, slower due diligence (3-6 months instead of 4-6 weeks in 2021), less favourable terms, and lower valuations especially at Series B onwards.

Where capital goes

Three sectors attract disproportionate attention in this cycle:

Generative AI

Roughly 35-40% of all 2023 VC went to AI companies. The trend continues. Most active subsectors: foundation models (mega rounds: OpenAI, Anthropic, Mistral, Cohere), vertical AI applied to niches (legal, healthcare, finance), tooling and infrastructure (vector DBs, orchestration, evaluation), and B2B apps with AI at their core.

One important caveat: many investments go to companies without sustainable differentiation ("wrapping GPT-4"). Mature VCs filter for real moat: proprietary data, custom fine-tune, distribution, or deep integration. For the patterns that actually work, see profitable niche AI startups.

Climate tech

Quieter but with real momentum in energy storage (batteries, hydrogen), carbon capture and verifiable offsets, agritech and alternative protein, and grid tech and energy efficiency. Specialist funds (Breakthrough Energy, Lowercarbon) and generalists are active. European sovereign funds prioritise climate.

Defence and security

Previously taboo in European VC, now accepted post-Ukraine. Helsing[1], Quantum Systems[2], and Skydio[3] have raised large rounds. Governments provide co-financed funds.

Where it is harder

Sectors still slow: consumer / B2C discretionary (except gaming and social), crypto (hibernating post-FTX; only serious infrastructure / L2 attracts capital), DTC retail (thin margins and generalised VC antipathy), generic B2B SaaS without AI (saturated; only works with very clear differentiation), and traditional mediatech (displaced by the attention economy).

Companies in these sectors raise smaller rounds, on worse terms, and after more time in market.

Updated sizes and stages

Orders of magnitude in 2024:

  • Pre-seed: $500k-2M for ~15-25% equity.

  • Seed: $2-6M for ~15-20%.

  • Series A: $8-20M for ~20-25%.

  • Series B: $20-60M.

  • Series C+: $50M+.

In AI, these numbers skew upward. A frontier AI "seed" can be $20M or more.

What has changed vs 2021: seed is now more competitive than Series A; the Series A bar requires clearer PMF, $1-3M ARR, and 20%+/month growth; Series B requires $10M+ ARR with demonstrated capital efficiency.

What investors look at now

The rulebook has changed. Current priorities:

  • Capital efficiency. Burn multiple (burn / net ARR added) must stay low: 2x acceptable, 1x good.

  • Growth with fundamentals. Expensive growth purchased via marketing is devalued.

  • Clear path to profitability. "Growth to the moon" no longer suffices.

  • Defendable moat. Proprietary data, network effects, switching costs.

  • Large but realisable TAM. Inflated TAMs no longer pass.

  • Experienced team. First-time CEOs in capital-intensive sectors face more friction.

Due diligence in 2024

The changes from 2021 are substantial:

  • Deep reference checks: investors call ex-employees and ex-customers, not just the references you provide.

  • Codebase review: fund CTOs review the code. Bad code is a red flag.

  • Exhaustive unit-economics analysis.

  • Deeper legal review: IP, contracts, compliance.

  • Customer calls: 5-10 calls with real customers, not the ones you select.

Expect 2-4 months of DD as normal. Founders who come in with clean cap tables, solid documentation, and defensible unit economics move through this stage noticeably faster.

Preparing the round

A practical runbook by stage:

Six months out: tidy metrics, financials, and product. Resolve technical debt or any issues that would surface in DD.

Three months out: teaser deck and full deck. Build your target investor list with research on check size, thesis, and existing portfolio.

Two months out: warm intros. First coffees with VCs.

Month one: official pitches, term sheets where there is genuine interest.

Months two and three: deep DD with lead investors, terms negotiation.

Months three and four: close, legal documentation, wire.

A well-run round takes 3-6 months today. For founders building outside traditional startup hubs, the alternatives to the Silicon Valley ring cover how fundraising dynamics differ when you are not in the default network.

Alternatives to VC

If VC is not the right fit for any reason, there are growing options:

  • Revenue-based financing (Pipe, Capchase): useful for SaaS with stable ARR.

  • Venture debt: extends runway without dilution.

  • Bootstrapping with profitability: valid if the market allows it.

  • European grants: Horizon, EIC for deep tech.

  • Corporate VC: strategic, with different terms and interest alignment.

VC is one tool among several, not the only one or necessarily the best for every startup.

Conclusion

The capital market in 2024 is healthier than 2023, but still demanding. Founders who understood the shift (capital efficiency, serious DD, real-metric expectations) have an edge. AI dominates capital, but not all "AI" attracts; only with real moat. Climate and defence are growing opportunities. For startups outside these tailwinds, the game is building solid fundamentals before going out to raise.

Sources

  1. Helsing
  2. Quantum Systems
  3. Skydio