Earlier this year, Tom Loverro, a partner at venture capital firm IVP, announced that the economic downturn following the pandemic has ended and advised businesses to prioritize growth over cost-cutting.
However, according to Brian Hirsch, co-founder of Tribeca Venture Partners, thousands of companies are still struggling to raise their next round of funding or survive at higher valuations.
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Hirsch stated that Tribeca Venture Partners, an investment firm established 13 years ago, has a late-stage investment strategy that differs from traditional growth funds, focusing on companies forced to raise funds at the same or lower valuations as their last round. In many cases, existing investors are willing to provide additional funding support, but they require third parties like Tribeca Ventures to assess the deals.
Hirsch pointed out that while venture capital firms are enthusiastic about high valuations for AI companies, companies in other sectors face severe challenges. According to the latest valuation data from Cap-table management platform Carta, an analysis of nearly 2,000 software transactions this year shows that in Series B funding, the bottom 10% of companies have valuations of only $40 million, while the top 10% approach $1 billion. The price gap in Series D funding is even more pronounced, ranging from $27 million to $5.2 billion.
Companies at the higher end of valuations are undoubtedly related to AI. This year, well-known AI companies like ElevenLabs successfully raised $920 million in Series B funding, reaching a valuation of $920 million, while Cohere's Series D funding concluded with a valuation of $5 billion.
In stark contrast, the financing environment for non-AI startups is entirely different. Hirsch mentioned that despite successfully securing Series A funding 18 months ago after the end of the zero interest rate policy (ZIRP), non-AI companies face numerous difficulties in obtaining Series B funding, even with good revenue growth.
Hirsch likened the founders of non-generative AI startups to high school students who weren't invited to parties; even though their businesses are performing well, they go unnoticed. In fact, data from Carta indicates that only 9% of Series A companies are able to secure Series B funding within two years, a significant drop from the previous rate of 25%.
However, Tribeca Ventures is leveraging its growth fund to assist mature startups with their financing issues, primarily those with revenues exceeding $20 million. These companies are growing at a decent pace, but current market valuations are excessively high. Hirsch emphasized, "We are still in a process of de-bubbling, and we expect about two more years of cleanup ahead."
Key Points:
💡 **AI companies are thriving in fundraising, while non-AI companies face significant challenges.**
📉 **Only 9% of Series A companies can successfully secure Series B funding within two years.**
🔍 **Tribeca Ventures focuses on helping mature companies address the issue of high valuations.**
