Q4 2024 Venture Update: Navigating the VC Landscape

By Saxon Baum, Partner at Florida Funders

2024 was a stronger year for venture capital compared to 2023, with deal count and value improving but still far below the heights of the zero-interest-rate-policy (ZIRP) era. The market normalized to pre-COVID levels in terms of activity, though exit pathways remain constrained. The number of completed exits remained on pace with pre-2021 figures at around 1,300, but return-generating exits were scarce. Many of the exits occurring were smaller deals that did not meet investor return expectations, though they served to clear company inventory and maintain market health. Larger exits of $500 million or more represented just 3.6% of completed exits, yet they accounted for 78.9% of total exit value.

Looking ahead, 2025 presents a more favorable exit environment. The IPO market is reopening, M&A activity is increasing due to regulatory shifts at the FTC, and the election cycle resolution should bring investors more certainty. Additionally, rate cuts and strong public market performance indicate renewed interest in high-growth tech companies.

Fundraising Environment

While 2024 saw an uptick in deal activity, much of the fundraising momentum was concentrated in AI, with companies like X.ai and OpenAI leading the charge. Large, established firms continued to dominate venture fundraising while new fund formations declined. Emerging managers raised just $15 billion, marking the lowest total since 2015. The secondary market became a crucial liquidity channel as later-stage firms sought opportunities downstream to deploy capital into high-quality assets—an activity Florida Funders (FLF) witnessed firsthand with Rewst.

Deal Flow & Investment Activity

Venture deal activity in 2024 totaled $209 billion across 15,260 deals, exceeding pre-pandemic and 2023 figures but still falling short of ZIRP-era highs. Activity increased at nearly all stages, with pre-seed/seed and early-stage investments reaching yearly highs. Late-stage deals saw a modest recovery after two consecutive quarters of decline. With continued macroeconomic improvements and anticipated rate cuts, 2025 is expected to build on this momentum.

Portfolio Performance

2024 was a strong year for Florida Funders. With our new Fund 3, we invested in four new companies, several of which have secured up-rounds from Tier 1 VCs, including Andreessen Horowitz (A16Z) and SoftBank. We closed the year with significant returns, selling a portion of our Rewst position via secondaries and exiting Simplebet to DraftKings. Fund 3 fundraising gained traction at year-end, and signs point to an even stronger 2025 in new investments and liquidity events. Notably, we already have an LOI signed for a Fund 1 portfolio company exit expected in Q1 2025.

Final Q4 Thoughts

The venture landscape is poised for further improvement in 2025. The Federal Reserve has begun cutting rates, with three reductions in 2024, bringing the target range to 4.25%–4.5%, and two additional cuts forecasted for 2025. Combined with a constructive macro backdrop, higher equity markets, and relatively low volatility, this bodes well for IPOs and broader equity issuance. However, while tech valuations have rebounded and growth is rewarded, capital efficiency remains critical—growth-at-all-costs strategies are unlikely to return.

Additionally, the secondary market has shifted from investor-driven liquidity needs to a demand-driven dynamic, with investors proactively seeking secondary deals to clean up cap tables and position companies for future IPOs. As we move into 2025, early IPO activity will set the tone for the rest of the year, with disciplined valuations and a balance of growth and profitability remaining key.

Florida Funders remains committed to identifying and backing the best founders, maintaining our disciplined investment approach, and driving meaningful value across our portfolio.

We’d love to hear thoughts from fellow investors, founders, and operators—how are you seeing the market shape up for 2025? Let’s connect!