DocSend’s new data analysis of our Pitch Deck Interest (PDI) metrics shows continued lukewarm investor engagement, signaling a low ceiling but high floor for investors. Data shows that marketplace activity will still continue, however factors such as “higher for longer” interest rates will weigh heavily on investor activity during what is usually the fall rush. Despite relatively limited investor engagement, startup founders continued to seek out funding in Q3 2023: the amount of pitch decks sent out by founders in Q3 increased 9% year-over-year. The widening gap continues to highlight just how competitive this fundraising market is for founders.
Market seasonality invites cautious optimism
Quarter-over-quarter investor activity rose by just under 1%. An uptick, albeit slight, isn’t typically expected during the summer months. In the short-term, this shows reason for mild optimism: the increase in VC activity signals that from a demand point of view, investors have been gearing up for the fall rush.
For the past year and a half, founder activity has been steadily on the rise. This trend continued over the last few months, with founder links seeing a 2% increase, QoQ. Given founder activity levels and the fact that it’s been an investor’s market for some time now, this 2% uptick isn’t especially significant.
However, the fact that there was an increase in founder and investor activity during the summer months, which are typically quieter, indicates that we may see more activity over the next few weeks, just in time for the seasonal fall rush. However, this year’s ffall rush for investors may be less notable than in previous years. Spikes we’ve seen in previous years may be tempered this year by macroeconomic trends, such as recent news that interest rates will remain higher for longer.
In the short term, the case for cautious optimism remains. Even if these expected seasonal movements end up being softer than in years past, the very fact that we’re seeing seasonality at all is a sign of relative health in the fundraising marketplace.
2023 vs 2021 analysis reveal a competitive landscape for founders
The longer-term perspective complicates this picture. On the one hand, VC activity in Q3 is down less than 2% year-over-year, which is less than one might have feared given the macro volatility we’ve seen so far this year. Further, it’s encouraging that demand for decks is down less than 4% from 2021 levels in a much hotter fundraising market.
The YoY increases in founder activity indicate just how much of an investor’s market it is right now: founder activity is up nearly 9% year-over-year and nearly 16% compared to 2021. Although investor activity isn’t down sharply from the hot market of 2021, these two numbers have to be taken together to really understand what the market looks like: investor activity isn’t significantly down, but founder activity has increased by 16%. This leaves the current market very much in VCs’ favor. Founders are sending out more and more pitch decks, but investors aren’t looking at them very closely.
One key takeaway is that even though VC activity isn’t falling too far behind its previous benchmarks, the fact that founder activity continues to heat up means the marketplace will stay extremely tight for founders and tilted toward investors (who may still not be eager to cut checks, anyway).
Looking ahead: macro-economic trends continue to create an investors’ market
What do these takeaways suggest from a forward-looking perspective? At first glance, it might seem like deal volume would be poised to pick up, given the beginning of the fall rush, the Q-Q uptick in investor activity, and the continued high volume of founder decks in the marketplace. However, macro news coming right at the end of Q3 might end up giving investors pause: interest rates that will stay higher for longer are now being priced into equities, and this may dampen private investors’ enthusiasm somewhat through Q4 and into Q1 2024.
These macroeconomic factors will have a big impact on tech and VCs for the foreseeable future. Despite the cause for short-term optimism, there are still storm clouds indicating that we may see muted versions of past years’ VC behavior patterns going forward.
DocSend releases quarterly data analyses via our Pitch Deck Interest metrics to track and predict the investment landscape, informing founders of volatility or stability in the venture capital environment.
Key Leading Indicators of Fundraising Activity
There are three core metrics DocSend analyzes to track investors’ hunger for deals and founders’ quest for capital.
- Founder links created – the average number of pitch deck links each founder is creating via DocSend. This serves as a proxy for the supply of startups seeking funding. A “link” refers to the unique URL a founder creates using DocSend to share their pitch deck with investors. When the average number of links increases, it means that founders are sending their decks out to more investors.
- Investor deck interactions – the average number of investor interactions for each pitch deck link. This serves as a proxy for demand for investments. The higher the interaction metric, the more often decks are viewed, shared, and revisited by potential investors.
Investor time spent – the average time spent per pitch deck by potential investors. This metric offers a look at how long VCs are spending reviewing deals. More time spent per deck could mean investors are more closely scrutinizing deals.