Whether it's a seasoned founder hoping to launch their next startup or a first-time entrepreneur trying to take a side hustle to the next level, the vast majority of companies need outside funding to turn their vision into reality.

That's easier said than done. Market factors, economic conditions, and industry trends all play into a given startup's appeal to outside investors. Pouring capital into an emerging company carries risk, but there's also enormous potential for startups to deliver major revenue growth. Big, bold ideas that can transform an industry and make an impact are exciting—and young firms are essential for economic growth and job creation.

Getting in on the ground floor of a startup has clear appeal to some investors, but funding doesn't happen all at once. Startups go through different stages of funding as they grow, starting from the pre-seed and seed stages through Series A, B, C, and sometimes D rounds. At the pre-seed and seed stage, small and less established startups are still trying to assess the viability of their product or service. Their goal is to prove to future investors that they have the ability to grow and scale.

Typical investors for startups at this stage are friends and family, angel investors, and the founders themselves. Product development, market research, and hiring a management team are some common expenses that seed funding supports.

For investors and financial institutions that put capital toward these early funding rounds, investments in new companies with rapid growth potential are less risky and have fewer long-term commitments than later stages of funding. That makes it appealing—especially for investors who want to get in on the ground floor of the next big venture.

The size of seed rounds also increased, along with valuations, or the determination of a company's worth. The value of startup deals has increased across all stages of funding over the past decade—with seed deals leading the way. Median seed deal values have grown consistently since 2014, reaching a high of $3.1 million in 2024. The venture capital market overall has been moving toward earlier funding rounds, with pre-seed and early-stage deal values also tripling over the past 10 years. That's in contrast to late-stage deals, which have experienced lower growth.

Funding Rounds used data from PitchBook to analyze trends in deal values by startup funding round between 2014 and 2024 and to see what it means for investors.

Funding Rounds

Seed deal growth primarily driven by select industries

Seed deals tend to be concentrated in up-and-coming industries; it's no surprise that artificial intelligence startups have caught the attention of investors. Nearly half of all deal value in 2024 went to AI companies, including the top five largest deals in Q4. Databricks, the AI cloud and data analytics platform, had the single largest funding round, raising $10 billion in venture capital in 2024.

It was followed by OpenAI, which raised $6.6 billion, and Elon Musk's xAI, which had two rounds that each raised $6 billion. Anthropic, the AI startup that has prioritized the safety of using AI chatbots, was another big winner in the funding market. Though it initially delayed the launch of its chatbot Claude out of concerns about the potential harms of such a powerful AI model (which allowed rival OpenAI to beat it to the market), Anthropic has since attracted an investment of $4 billion from Amazon in November 2024, on top of the $1.25 billion it received the year prior.

Other AI startups that had significant rounds of funding in 2024 included Waymo, G42, CoreWeave, and Wayve. In total, nearly 30% of all deals in 2024 were for AI startups, triple the amount from a decade ago.

At the seed stage, investors were especially enthusiastic about companies applying artificial intelligence to health care, in areas such as diagnostics, pharmaceutical research, and administrative automation. AI-assisted diagnostics was one of the more popular areas with startups: Floy, which developed AI-driven software that helps radiologists detect abnormalities, raised nearly $6 million. Investors were also interested in startups using AI to better understand immune response. New York-based Jona, which raised $5 million, promises to help consumers better understand the relationship between the microbiome and health using AI.

Other top sectors for seed investors included space tech, construction, and fintech companies focused on the carbon economy. Such startups have raised millions of dollars to tackle a variety of challenges, such as asteroid mining, satellite design, construction permitting automation, and renewable energy financing.

While innovation startups in health, technology, and energy saw increased funding, consumer-facing startups have fallen out of favor with seed investors, with backing for cannabis, food and beverage, and e-commerce businesses in decline. The number of seed deals in consumer products have declined since reaching a high of 129 deals in early 2021, hitting a decade low of just 31 deals in Q3 2024. Median seed valuations for startups in this sector likewise fell to $11 million in Q3 2024 after reaching a high of $18 million just two quarters prior.

Overall, the size of seed rounds has been growing as more venture capital firms move toward investing in earlier stages. In addition to increasing deal sizes, valuations have also been rising. According to Carta, an equity management software company, the median valuation of seed-stage startups hit a record high of $14.8 million in Q3 2024. Median seed valuations ranged between $11.4 million and $12.5 million between Q3 2022 and Q1 2024 before jumping up by nearly 20% in the second half of 2024.

Dilution, or the share of ownership given up during funding, has not changed as much over the past few years, declining only slightly to 20% in Q3 2024. Dilution has been mostly flat since 2020, between 20 and 21%; 20% dilution is typically the established industry standard for a new seed investment.

While seed-stage companies have benefited from investor enthusiasm, fewer of them have been able to advance to later stages of funding. According to Crunchbase, only 20% of startups that had a seed round in 2022 have moved on to a Series A or later round of funding, compared to 61% of seed startups in 2018.

As startups struggle to prove their ability to grow, many will remain stuck in the seed rounds or shut down entirely, leading to significant losses for the venture capital firms that funded them. Whether investors' bets on these young companies pay off remains to be seen.

Story editing by Alizah Salario. Additional editing by Elisa Huang. Copy editing by Tim Bruns.

This story originally appeared on Funding Rounds and was produced and distributed in partnership with Stacker Studio.