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The collapsing french fundraising market : Time to invest or time to wait ?
- Despite a liquidity crisis, the venture market is hot and wilder than 2021, with entrepreneurs raising mega rounds at unicorn valuations pre product and pre revenue. VCs still have cash to deploy from funds raised during the 2019–2022 boom. The contraction in fundraising seems to have stabilized, as projections for 2024 show only a slight dip. There are actually two fundraising markets at the moment: the “traditional” fundraising market, which is shrinking, and the GenAI market, which is soaring. The essence of venture capital is to invest in outliers. France is internationally recognized for its AI talent with Yann LeCun being French. AI models require vast resources, pushing funding needs sky-high. Major U.S. funds have returned to France to fund AI startups. The AI surge has disrupted valuations, reducing the gap between early-stage and late-stage valuations. Funds are overall struggling to raise new capital and will eventually have less money to invest, leading to a decrease in early stage valuations and the end of the market dislocation, despite the AI hype.
- Many VCs prefer investing in suboptimal conditions over not investing at all. With fewer high-quality startups, funds are competing aggressively, often driving funding rounds and valuations up.
- Young partners are eager to build their track records quickly, creating pressure on General Partners to continue investing.
- Some investors believe the market will eventually bounce back.
- When valuations are sky-high or if we are in the midst of a speculative bubble, VCs still invest in once-in-a-lifetime opportunities to fund the global champions of a new category.
- Creating leading AI models requires vast resources, which pushes funding needs sky-high. As a result, early-stage AI companies are raising larger rounds to cover these costs, allowing VCs to deploy capital quickly.
- Some investors view the rise of GenAI not as just another tech wave like software, cloud, or mobile, but as the ultimate category — the greatest invention in human history and possibly the last one we’ll ever shape.
- The AI surge has disrupted valuations, reducing the gap between early-stage and late-stage valuations. Should early stage investors accept these high valuations to avoid missing out, or wait for the hype to cool?
- Funds are overall struggling to raise new capital and will eventually have less money to invest, leading to a decrease in early-stage valuations and the end of the market dislocation, despite the AI hype.
- As funds are struggling, there will be more losers than winners among VCs. Who will win?
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