10 Predictions for Seed-Stage Investors in 2024

A Gradual Path to Higher Returns

About the Author: Ron Levin is Managing Partner at Alumni Ventures, where he leads AV’s Seed Fund and Super Angel Partner Program. Prior to joining AV, Ron was both an angel investor and advisor to multiple high-growth technology startups. He was previously co-founder and CEO at TravelPerk, an enterprise travel platform based in Barcelona that is now valued at over $1 billion. Earlier in his career, Ron was a consultant with McKinsey & Co. and he has spent much of his professional life working at the intersection of the aviation, travel, and technology sectors. Deeply committed to social impact through entrepreneurship, Ron recently published the book “Higher Purpose Venture Capital,” which profiles 50 venture-backed startups that are making a difference for society.

The past year was a rough one for venture capital, with valuations challenged, some companies unable to raise cash or go public, and many investors “holding their dry powder.” Like our venture colleagues, we’re now eagerly studying the horizon. Peering into the Alumni Ventures Seed Fund team’s crystal ball, we spotted a number of trends that led us to a few predicted outcomes and evolutions for the year ahead. What say you?

And if you’d like to dig deeper into these predictions, join us for a webinar.

Webinar: 10 Predictions for Seed Investors in 2024

We see both challenges and opportunities in the 2024 market. Join us as we discuss our 10 predictions for seed investors in 2024. Register Here »

AV’s Predictions for 2024

We see both challenges and opportunities in the 2024 market.

1. A gradual path to recovery will lead to significant upside in the long run.

There is no question that the venture market has been in a cyclical downturn over the past two years, following a frothy period that accelerated through Covid. This period of relative malaise is likely to continue through the first two to three quarters of the year.

However, we believe there are signs of recovery on the horizon, based on the recent record-setting Dow Jones average, cooling inflation, and a resilient employment market. Once the early-stage and tech market recovery do pick up, it will lead to a rapid uptick in valuations, M&A activity, and competition from investors fighting their way into the best opportunities. Some believe now is the time to put the chips in.

As the late investor/philanthropist Shelby Cullom Davis once quipped: “You make most of your money in a bear market; you just don’t realize it at the time.”

2. A shaky macro environment will focus investors on startup activity in stable industries.

Between the shifting geopolitical landscape resulting from climate change, wars, and the pending US elections in late 2024, the early part of the year will be fraught with uncertainty. Expect to see significant fluctuations in markets such as energy and cryptocurrencies, while a flight to quality among investors drives investment into less cyclical sectors such as education, defense, and health technology.

3. The IPO and exit market will start showing signs of life.

In 2023, the market for liquidity among late-stage ventures offered little comfort to founders and investors. High-profile companies such as CAVA and Klaviyo are presently trading below their respective IPO price. This has led to a glut of companies reaching critical mass for going public but sitting on the sidelines until markets recover. This can only last so long as companies have cash and need to seek additional liquidity to fuel their growth. Watch over the course of the year as a trickle of activity leads to a tsunami.

4. Angel investment activity will accelerate only once liquidity events resume.

The level of retail investment into new ventures partly relies on capital previously returned to investors. In addition to IPO and M&A liquidity, early investors count on a thriving secondary market to generate cash returns. Look out for resurging activity and the individual investor level — including investor groups and syndicates — toward the back half of 2024. In the meantime, the contraction in investment outflows will lead to higher-quality deal selection and more robust business models among those that do receive meaningful funding.

5. Growth funds will re-emerge from the shadows.

Later-stage growth investors have retreated to let the dust settle on valuations and await the results of a viability shakeout among software and other tech business models. For the robust companies that have grown and withstood economic ripples, the opportunity to seize upon the dry powder of growth equity funds will become a huge opportunity. The deployment of this capital will help trigger increased participation at the seed level and may entice multi-stage investors to see the potential for long-term returns in earlier-stage opportunities.

6. AI will continue to transform nearly every industry.

It is hardly going out on a limb to argue that the impact of AI is just getting started. It is not just that AI will continue to revolutionize fast-moving industries, but its impact will even start to break through sectors that have been relatively untouched by technology. The power of AI and machine learning to drive profound insights into human behavior in countless aspects of our personal and professional lives cannot be understated.

7. Consolidation will pick up among emerging competitors.

With capital relatively scarce, particularly at the early growth (Series A and B) levels, more companies will seek to get together with competitors to leverage economies of scale across product, marketing, and sales. This will be particularly true in fintech and consumer markets, where a glut of products targeting similar users will thin the field and where sales teams and channels can be combined to form more durable and economically attractive operations.

8. Rapid advancements will drive a shake-up in higher education.

While online learning has been around since the dawn of the information age, Covid shutdowns and the acceptance of remote work are breeding increased demand. Higher education is going to face challenges in remaining relevant and competitive in light of several trends:

• Tuition costs that have become exorbitant for most families;
• Employers hiring for direct skills rather than degrees;
• Rising income levels and demand for vocational professions and
• Universities perceived as “Ivory Towers” becoming increasingly political, disjointed, and aloof.

Online learning platforms, particularly those focused on technical and vocational skills, will replace the need for traditional college degrees in many fields. Already, numerous big tech players have said that they no longer require college degrees for some of their highest-paid positions, particularly in software development. Another first, even major airlines are saying that they won’t require a bachelor’s degree if a pilot meets all the technical requirements to fly their planes. With certain private colleges and universities now costing upwards of $70,000 per year all-in, one has to wonder how many professions will continue to require a degree as an entry-level requirement.

9. Digital health as a service will become mainstream.

A key lever of employee retention across all sizes of enterprises will remain the workplace benefits that ensure happiness and wellness. Top of the list are health services, including services for women, People of Color, those with disabilities, and individuals seeking mental health support. Digital health offerings are proliferating, and employers will be key to bringing more of the population into the serviceable market by democratizing access to needed services that are often unaffordable or inaccessible for individuals.

10. A revolution is coming in food, diet, and wellness technology.

Who doesn’t want to live a longer, better life? Longevity and quality of aging will grow into the forefront of investor attention. Spurred by GLP-1 drugs that are helping people to lose weight and manage chronic conditions such as diabetes and heart disease, people are feeling empowered to control their health in radically new ways. The food supply chain will see more opportunities to bring healthier eating options to market and disrupt the big ag hyper-processed food supply chain. Meanwhile, connected devices allow people to monitor their health in unprecedented ways to enjoy agency and control over their destinies in ways that were unavailable just a few years ago. Watch for more seed, as well as early and growth stage capital, to drive continued innovation for transforming human lifespans.

JOIN OUR WEBINAR

As we gaze toward 2024, we believe seed investors will gravitate toward value-driven growth as investor capital returns to early-stage ventures. Agree or skeptical? Let us know what you think! And join us for a webinar where we dig deeper into these trends and take your questions.

Alumni Ventures offers accredited individuals access to professional-grade venture capital, a key asset class missing from the portfolios of many sophisticated investors. Since 2014, AV has raised more than $1.2 billion across 40+ Alumni and Focused Funds, serving a growing network of 9,500+ investors and 600,000+ community members. AV evaluates hundreds of investment opportunities every year and has backed 1,200+ unique portfolio companies. Alumni Ventures is the #1 most active venture firm in the U.S., and #3 most active in the world, according to PitchBook’s 2022 rankings. AV funds are private, for-profit, and not affiliated with or sanctioned by any school. For more information, visit av.vc.

This communication is from Alumni Ventures, a for-profit venture capital company that is not affiliated with or endorsed by any school. It is not personalized advice, and AV only provides advice to its client funds. This communication consists in the main of forward-looking statements, generally consisting of any statement pertaining to any issue other than historical fact, including without limitation predictions, financial projections, the anticipated results of the execution of any plan or strategy, the expectation or belief of the speaker, or other events or circumstances to exist in the future. Forward-looking statements are not representations of actual fact, depend on certain assumptions that may not be realized, and are not guaranteed to occur. Any forward-looking statements included in this communication speak only as of the date of the communication. AV and its affiliates disclaim any obligation to update, amend, or alter such forward-looking statements, whether due to subsequent events, new information, or otherwise.