Signs of improvement across the Innovation Economy
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Highlights from J.P. Morgan’s Innovation Economy Midyear Outlook
“We are starting to see signs of improvement across the Innovation Economy. The Fed is expected to start lowering rates in Q3 2024, and the U.S. still looks on track for a ‘soft landing,’” write Melissa Smith and John China, Co-Heads of Innovation Economy for J.P. Morgan. “More certainty would provide a boost of confidence to investors who have slowed their pace, companies waiting to go public could take the plunge and would-be acquirers might shed their hesitation and make deals. A meaningful capital release from increased exit activity would alleviate a tight fundraising environment for both investors and founders and help close the divide between the ‘haves’ and the ‘have-nots.’”
However, challenges remain. “Currently, 2024 is on a similar trajectory to 2023, which by most metrics was a weak year (in this decade) for venture. The big question is whether improvement will continue, or if changes in macroeconomic factors combined with a looming U.S. election will stall the recovery,” they note in J.P. Morgan’s Innovation Economy Midyear Outlook.
The report explores major trends shaping the Innovation Economy. Aumni, a J.P. Morgan company, contributed key data.
Among findings, the report highlights that while there is some improvement in early-stage venture fundraising, late-stage companies continue to struggle. For example, while down rounds have increased across funding stages, the prevalence is most significant in Series C.
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Meanwhile, among late-stage equity financings, we are seeing a rising prevalence in some terms that tend to favor investors, such as participating liquidation preferences. Conversely, there is a loosening of some terms in early-stage.
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What do these dynamics, and other trends, mean for venture going forward? See more in J.P.Morgan’s Innovation Economy Midyear Outlook report here.
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