Tag Archives: Startups

Seed / Series A deal volume : 2023 vs prior years

I pulled up 2023 deal volume via Pitchbook for all Seed and Series A rounds for US based startups, was curious to see how 2023 went from a pacing perspective vs prior years. 4,668 companies raised a Seed or Series A round in 2023. As expected it was down from the COVID / ZIRP era of 2020 to 2022. In the peak year of 2021 8,206 companies raised a similar round, so in 2023 it was down 40% from this peak year. The last time the number of companies that raised a similar number of 2023, was going back 7 years to 2016.

In terms of 2024, I predict that we will see LESS companies raise than 2023, this is for a few reasons. One main reason is that many of the 2023 announced rounds , were actual rounds that took place in 2022 but the announcement of the round was in 2023, so I think 2023 data was actually much lower than the 4,688 companies that I found via the Pitchbook query. Another reason is that there are some funds that will be raising money from LPs in 2024 and I predict that their pacing is going to be slower than 2023. I don’t anticipate VC firms investing at a fast pace than 2023, so even if VC firms have dry power aka callable capital from LPs, I don’t see them increasing their pacing at this particular stage. Overall, 2024 will still be a good year to raise capital and many VC firms will be active, but it might look more like 2013, in which 3,889 startups raised a Seed or Series A round of financing.

Where the puck is going

There is a famous quote “Skate to where the puck is going to be, not where it has been.”

In terms of early stage startup activity , I wanted to take a look at which geographies in the United States were getting the most traction from an early stage venture capital deployment perspective. We know that COVID created some displacement and a shift in where early stage startups were being formed. I took a look at data available on Pitchbook to see the leading states , cities and zip codes. Given that I wanted to get the latest trends “where the puck is going” from a geo perspective, I queried all Seed and Series A deals in the 2nd Half of 2023.

From a state perspective, the leaders were:

  1. California : 633 companies
  2. New York: 295
  3. Massachusetts: 128
  4. Texas: 118
  5. Florida: 78
  6. Washington: 74

From a specific city perspective (not metro areas):

  1. New York City: 265 companies
  2. San Francisco: 216
  3. Austin: 64
  4. Los Angeles: 51
  5. Boston: 39
  6. Seattle: 39
  7. Miami: 35
  8. Palo Alto: 33
  9. Cambridge: 28
  10. Chicago: 25

In terms of Zip Codes, this is a good way to measure density:

  1. 94104: San Francisco : 23 companies
  2. 94114: San Francisco: 23
  3. 10013: New York City: 19
  4. 94306: Palo Alto: 16
  5. 10001: New York City: 14

As you can see from the data: California and New York dominate in terms of where early stage startups are being created. New York City is now the #1 city for startup formation. Historically it was San Francisco, but many startups moved during COVID due to several factors, mainly due to strict COVID restrictions and also increased homeless / drug / crime activity. San Francisco is gaining momentum with the surge of AI (artificial intelligence) related startup and Y Combinator (#1 accelerators in terms of exits) being back to in-person cohorts.

I will caveat that although the data is for announced rounds that took place the 2nd half of 2023, many rounds are typically delayed, so they could have taken place 6, 12, 18 months ago, which defeats the purpose of the post, as I wanted to share what is happening now from a geo perspective. Will revisit this post in 6 months and see if the data changes in term of trends.