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AI boom masks fundraising struggles for non-AI startups | TechCrunch

Dec 18, 2024 - techcrunch.com
Earlier this year, IVP's Tom Loverro suggested that the post-pandemic downturn is over, urging companies to focus on growth rather than cost-cutting. However, many companies still struggle to secure higher valuations or survive, with thousands potentially affected, according to Brian Hirsch of Tribeca Venture Partners. Tribeca's late-stage strategy involves investing in companies forced to raise capital at the same or lower valuations than before, often requiring a third party to value the deal. While AI companies attract high valuations, non-AI startups face significant challenges in fundraising, with only 9% of Series A companies securing Series B funding within two years, down from 25%.

Carta's data highlights the stark valuation disparities, with Series B deals ranging from $40 million to nearly $1 billion, and Series D deals from $27 million to $5.2 billion. AI companies like ElevenLabs and Cohere are at the high end, while non-AI startups struggle despite decent growth. Tribeca Ventures aims to assist mature startups with revenues over $20 million by pricing down rounds, as many valuations remain too high for the current market. Hirsch believes the market is still undergoing a correction that could take a couple more years to resolve.

Key takeaways:

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  • IVP's Tom Loverro suggests that the post-pandemic downturn is over, urging companies to focus on growth rather than cost-cutting.
  • Tribeca Venture Partners is investing in companies forced to raise capital at the same or lower valuations, with existing investors often needing third-party validation.
  • AI companies are attracting high valuations, while non-AI startups face challenges in securing funding, with only 9% of Series A companies advancing to Series B within two years.
  • Tribeca Ventures is helping mature startups with revenues over $20 million navigate down rounds, as the market continues to adjust to more realistic valuations.
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