Venture capital funding picked up in 2024, and investors have reason to believe it will continue to do so in the coming year.
Interest rates are decreasing, with the Federal Reserve issuing its latest cut in Decemberr. Online spending hit a record $10.8 billion on Black Friday, and shoppers were still spending healthy amounts well into the holiday season. In turn, the ingredients are there for fundraising to pick up the pace. That said, VCs are still picky about the types of product categories and healthy business standing of the startups they’re looking to back.
A number of venture capitalists spoke to Modern Retail about the macroeconomic environment and what they’re seeking from consumer brands vying for their venture dollars. Throughout 2024, VCs made more headway in finding the right companies to invest in.
By the fourth quarter of 2024, the amount of VC cash poured into consumer startups was up 25% from 2023, when the sector’s activity was at a nine-year low, according to Silicon Valley Bank data. The overall total of deals remains much lower than the 2021 boom, with many of the 2024 investments being late stage rounds.
For the most part, VCs who spoke to Modern Retail said they remain cautiously optimistic about 2025. They expect a slight uptick in both M&A and the number of venture capital investments. However, they don’t expect deal levels to come roaring back to 2021 levels.
A sobering new VC model
Venture capitalists who specialize in consumer packaged goods say the idea of investing in new, concept-driven startups that have yet to prove product-market fit has probably come to an end.
Jennifer Stojkovic, general partner at Joyful VC, has invested in a number of early-stage food tech companies, such as lab-grown pet food Meatly and sustainable dairy startup Cultivated Biosciences. Sojkovic said that overall, the number of annual deals for many firms has decreased compared to pre-2023. The number of investment deals Joyful made decreased by roughly 25% between 2023 and 2024.
VCs are cautiously optimistic about an improved 2025 funding landscape
