Austin's startup ecosystem started off 2024 at a relatively slow pace, according to a first quarter report by PitchBook and the National Venture Capital Association.
Local startups raised a total of $728 million across 79 deals, the report shows. That's the lowest deal count since third quarter of 2020, when the metro logged 70 deals for a total of $690 million invested.
The report notes that Austin's funding puts it at about 13% of its 2023 annual deal count, the lowest proportion of any of the top 10 markets.
Venture funding reports aren't all-encompassing and often don't include non-traditional deals, as well as some angel investing and accelerator funding. But the new figures show that Austin still lags far behind the investment numbers it attracted during the peak years of 2021 and 2022, when the metro logged over $1 billion — or, in a couple of quarters, over $2 billion — in funding across more than 100 deals.
Austin's lower funding figures coincide with a lackluster first quarter nationally. But PitchBook and NVCA suggested that venture capitalists have plenty of money in their coffers, portending an uptick in the months ahead.
"Despite low capital outflows, venture capital did not enter 2024 with a lack of capacity," NVCA CEO Bobby Franklin wrote in the report. "Years of strong fundraising combined with low levels of investment in recent quarters mean that the sector is sitting on well over $300 billion in dry powder. This relative abundance of capital contrasts sharply with the lack of investment over Q1, but it is best viewed in the context of dramatic shifts to the geopolitical, regulatory and macroeconomic environments going back to the windfall years of 2021 and 2022."
As startups see their runways shrinking, the slowdown in funding has given VC firms the upper hand in many deals, allowing them to add protective terms to new deals sometimes, such as cumulative dividends and liquidity multiples, the report says.
While the numbers are down and many startups are on the hunt for new funding, Austin-area venture capitalists have said in recent months that they're steadily making investments. And many of the city's top firms are still deploying dollars that they raised for new funds in the past couple of years. That suggests that funding and deal count are likely poised to rebound throughout the rest of the year.
The top first-quarter deals for Austin startups, according to the report, were:
