VC megadeals are booming – and AI is surprisingly not the top category

Ask any VC if we are still in a bear market for venture capital and that investor will almost certainly tell you no, that money is still flowing to good companies.

This may sound like spin, as there are many anecdotes about how hard it still is for those who raise now. And for good reason. Down rounds – that is, raises at a lower valuation than a previous round that founders want to avoid unless they have no other choice – were still near record highs in the first half of 2024, according to Aumni’s Venture Beacon report. According to Aumni’s report, around 39% of late-stage deals were down rounds. This covers Series B and beyond, with the largest percentage of down-rounds occurring in Series C and beyond.

Even Stripe – whose success no one questions – has not yet fully recovered to its $95 billion value in 2021 after a large secondary transaction in July. Although by then it had risen back to $70 billion.

But despite this gloomy mood, the statistics for the end of 2024 are also full of good news. New data from Crunchbase, for example, shows a real boom in megadeals – financing rounds of $100 million or more.

Crunchbase has tracked nearly 240 mega rounds for U.S.-based startups so far this year, already more than the 210 raised all of last year.

What’s even more interesting is that Crunchbase’s top category for these deals was not AI. Biotech and healthcare startups accounted for 87 mega deals, compared to 26 in the second-place AI category.

Some of these rounds are admittedly crossovers: companies working on AI for healthcare. Crunchbase, for example, calls AI drug discovery company Xaira Therapeutics one of the most notable megadeals in health technology. Xaira launched in April with a massive $1 billion round led by ARCH Venture Partners and Foresite Labs (both known for biotech), but also classic Silicon Valley VCs such as NEA, Sequoia Capital, Lightspeed Venture Partners, SV Angel, and others.

We would probably call Xaira an AI company and add it to our ongoing list of AI startup megadeals tracking.

But there were also deals like Superluminal Medicines’ $120 million Series A led by Eli Lilly. While the company also uses machine learning to accelerate drug development, its focus is on finding drugs for specific small molecule receptors on cell membranes. This is a hot topic in biotech right now – no AI washing required. The deal was backed by classic tech investors Insight Partners and Gaingels, as well as NVentures (Nvidia’s venture capital arm), which seems to be everywhere these days.

Other Series A and B biotech megadeals include the $120 million Series B completed by Terray Therapeutics, also working on small molecule drugs; and the $100 million Series A Judo Bio was landed to tackle kidney drugs. It seems like every week a new biotech megadeal is announced.

In addition to healthcare technology and AI, cybersecurity is another sector raising mega rounds, with 16 such deals so far this year. Examples include email security startup Kiteworks raising $456 million, data security startup Cyera raising $300 million, and cloud security startup Wiz raising a whopping $1 billion. collects dollars.

There are a few other trademarks for early-stage founders. According to Aumni, pre-money valuations for seed and Series A deals improved slightly in the first half of the year.

Deals in 2024 also appear to be moving at a similar pace to 2023, according to the Q3 PitchBook-NVCA Venture Monitor. Nearly 16,000 deals closed in 2023, just a little above the average annual activity pre-pandemic and the ZIRP-fueled hustle and bustle of 2020-21.

For those interested in learning more, TechCrunch Disrupt 2024 will host a session on the Builders Stage titled “What You Need to Raise a Series A Today,” and another on “How to Raise in 2025, When.” You have a flat, down or overtime round.”