VCs Optimistic About Improved 2025 Funding Landscape
Venture capital funding had a good year in 2024, and it looks like the trend will continue into 2025. With interest rates dropping and online spending hitting record highs, investors have reason to be hopeful. However, they are still being selective about the startups they choose to support.
Throughout 2024, venture capitalists made progress in finding the right companies to invest in. In fact, by the end of the year, the funding for consumer startups had increased by 25% compared to 2023. While this is an improvement, the total number of deals is still lower than the peak in 2021.
Looking ahead to 2025, VCs are cautiously optimistic. They expect to see more mergers and acquisitions and an increase in venture capital investments. However, they don’t anticipate a return to the levels seen in 2021.
Some venture capitalists specializing in consumer packaged goods believe that investing in unproven startups may no longer be a viable strategy. Instead, they are looking for companies with a proven track record and solid revenue. As Jennifer Stojkovic from Joyful VC puts it, startups making under $10 million in revenue are considered high risk.
While the fundraising landscape has its challenges, there are still opportunities for consumer brands. Private equity firms are becoming more attractive options for companies looking for investment, as they offer a different return on investment model compared to traditional VCs.
Investors are also becoming more cautious about the categories they choose to invest in. Food and beverage startups, in particular, are considered risky due to the high capital investment required. Rather, investors are looking at AI startups and products that cater to the growing demand for cleaner ingredients and healthier food options.
When it comes to funding consumer brands, investors are increasingly focused on product-market fit and the experience of the leadership team. Milestone-driven investments are becoming more common, with a focus on supporting companies that are close to profitability and have a clear growth strategy.
Overall, while the fundraising landscape for consumer brands is evolving, there are still opportunities for startups with the right ingredients for success. Investors are being more discerning, but for companies that can demonstrate their value and potential, there is still funding available.
