A new report from DocSend Inc., a Dropbox Inc. company, released today surprisingly finds that all is not doom and gloom in the venture capital sector, with investor activity surpassing 2021 engagement levels and hitting record highs.

In the first quarter, based on the company’s Pitch Deck Interest metric, investor activity hit a record first-quarter weekly high and saw a spike of 21.7% in early March. Founder pitch supply also surged by 20% from the first quarter of 2021, signaling what the report suggests to be fertile ground for VCs to invest.

Over the quarter, both founder and investor activity rose following a slow 2023. Investor engagement with pitch decks was found to be outpacing the rate of founder pitch decks sent out, both year-over-year and quarter-over-quarter, demonstrating decreased competition in a crowded landscape as VCs prepare to make deals.

Investor pitch deck interactions were found to have increased 17.8% year-over-year in the first quarter, while the rate at which founders distributed pitch decks increased by 9.2%. Investors were found to spend an average of two minutes and 30 seconds reviewing each pitch deck to evaluate opportunities and make decisions.

In contrast to data released by PitchBook-NVCA Venture Monitor last week that noted recorded lows in venture capital activity in the first quarter, DocSend believes the first-quarter numbers mean that 2024 could be on pace to match record-breaking 2021 levels. The quarter saw a 17.3% quarter-over-quarter rise in pitch deck interactions.

“Investors appear to be as enthusiastic as they were during the bullish 2021 fundraising climate,” said Justin Izzo, senior data and trends analyst at Dropbox DocSend. “Many things have changed during this level-set, as investors practice a more poised due diligence and focus their excitement on disruptive companies that hold long-term promise. If this momentum continues, it could make way for a founder-friendly market later in the year.”

Not surprisingly, the report cites the current artificial intelligence boom as one main driving factor, along with the potential for interest rate cuts later this year, although with U.S. inflation still not fully under control and increasing employment, interest rate cuts might be wishful thinking.

Commenting on the overall market, Darrel Frater, senior associate at Serac Ventures, told DocSend that the “market is gravitating towards startups that offer not just innovation, but also practical, scalable models and the traction to prove it,”

“We’ve seen founders come forward with pitches that are ambitious but also realistic, emphasizing sustainable business practices,” Frater added. “We may not see funding levels approach those of 2021, but the pathway to get there seems possible, given renewed interest in VC from limited partners. If managers are able to successfully raise from LPs in this climate, founders will see more capital flowing to their companies.”

Photo: Wikimedia Commons