1H'24 Los Angeles Seed Report

We’re excited to share the most recent update of our LA Seed Report, encompassing all Seed funding to SoCal companies in the first half of 2024.

As always, let’s begin with national seed activity (Crunchbase). Investors allocated a total of $7.5B into Seed stage companies in 1H ‘24 ($3.6B in Q1 and $3.9B in Q2). When taken against both halves of 2023 (avg of $7.7B), funding is nearly flat. Interestingly, Q2 saw an increase in dollar volume (+8.33% QoQ and +5.41% YoY) despite a decline in deal volume (-18.43% QoQ and -37.98% YoY), indicating a significant increase in deal sizes. 

Turning to LA’s YoY Seed Activity, we actually see a slight decline in dollar volume against 1H‘23 ( $436M for 1H‘23 → $392M for 1H‘2024), while deal volume largely stayed flat over the same period (96 deals for 1H‘23 → 92 deals for 1H‘24). Taking Q1‘24 against the same time last year reveals an 83% increase in deal volume and a 59% increase in dollar volume. With such a sizable rise against last year’s numbers, we would have anticipated that the trend would continue into Q2 (dwarfing the prior quarter as Q2’23 ($301.2M) did Q1’23 ($134.6M)) — it did not. Rather we saw a 42% crash in deal volume and a 40% decrease in dollar volume between Q1’24 and Q2‘24.

Despite Q2’s decline in deal and dollar volume, the median Seed round actually increased by $1M QoQ ($3M in Q1 to $4M in Q2). It’s likely due to hardware startups; the number of hardware deals in Q2 doubled from Q1 and the average round size increased from $6.4M to $7.8M across Q1 and Q2. The most significant focus areas within said Hardware companies were Aerospace, Manufacturing, Defense, and, CleanTech (categories that notoriously garner higher round sizes than their counterparts due to their capital-intensive nature). It’s worth shouting out that LA is a natural home for nascent hardware companies given our SpaceX/Tesla, Raytheon, Boeing, and Anduril DNA.

Did someone say AI? In the first half of 2024, AI-related financings have already exceeded the total for 2023.  In the graph below, we see the most significant uptick in AI-based SaaS startups occur between 1H and 2H‘23, which is also when the most significant jump in AI funding occurred ($14.5M in Q2'23 to $71.7M in Q3’23). This trend sustained itself through Q1‘24, in which 21% of SaaS companies were AI-based, but that percentage dropped to 13% in Q2. The AI craze seems like the most plausible reason as to why deal volume was so high in Q1. 

Here are some other key trends we think are worth noting from this half:

• PropTech is getting demolished: 0 deals were done in PropTech, compared to 4 in the latter half of 2023. We think this is a result of the increase in interest rates and a massive decline in spending on the part of the largest CRE players, but also because it’s traditionally an industry with lower venture returns in recent periods. We believe PropTech could rebound in the future with the pairing of AI or CleanTech. 

• Gaming is leveling up: While the average check sizes have stayed the same YoY, deal, and dollar volume in the 1H '24 ($38M, 9 deals) has already surpassed the deal and dollar volume for Gaming startups in all of 2023 ($33.6M, 8 deals). We think that as Gen Alpha increasingly gets on screens and seeks niche communities to settle in online, Gaming will only continue to grow. 

• Cyber eyes new threats: Average check sizes for cybersecurity Seed rounds increased 67% from the previous half; we think this is bolstered by new threat vectors and security concerns as AI pervades additional products and enterprise ecosystems seek to adapt securely.

• Social commerce is hot: LA is the hub for social activity. Consistently every quarter since 2023, ~5 startups raise an early round in Social tech. In 2023, 90% of Social startups were mobile-based social media ventures. In this half, we’re seeing greater differentiation: 40% of social media was e-commerce, which is an intersection we saw none of last year. Last year, e-commerce was largely paired with Health or physical Consumer products. The rise in social commerce is one to note as brands continue to try recreating the serendipitous in-person shopping experience online.

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Amplify is a first check fund backing LA’s earliest and strongest tech teams. You can get in touch with us here.

(Our report covers seed deals that have been publicly announced. Please reach out to [email protected] with any questions or comments.)