Viktoriya Tigipko is one of the most recognized names in the Eastern European VC community and is a native of Ukraine.
She runs TA Ventures, a pre-seed and seed stage VC, since 2010. Additionally she founded iClub (an angel network), WTech (a community for women in tech), and is Chair of the Board at the Ukrainian Startup Fund.
Guest Author: Viktoriya Tigipko
2024 was a pretty tough year for VC investing. According to PitchBook, VC investments dropped by nearly 40% in the first half of 2024 compared to the same period in 2022.
The global economic landscape, tightened liquidity, and recalibrated expectations have transformed the venture ecosystem. I think for the better.
As the dust settles, the key question remains: Is VC investing still lucrative?
The answer in my view is clearly yes, but success is now reserved for those who understand the new rules of the game and adapt to this evolving landscape.
The Resilient Few: Great Startups Survived
One of the key developments during this period has been the survival of truly great startups.
These companies, which have endured economic turbulence, are now stronger than ever.
As some of them look to raise funds in this new environment, these businesses represent a great opportunity for investors from my perspective.
Some examples would be:
- Stripe – The fintech giant continued to thrive by focusing on profitability and expanding its ecosystem of products, like payment processing and APIs for businesses.
- Figma – Despite the challenges of 2023-2024, Figma continued to dominate the design collaboration space, achieving high user retention and scalability.
- Notion – Known for its all-in-one workspace platform, Notion managed to keep growing by improving customer retention and optimizing their business model with premium features.
- Databricks – As a data and AI platform, Databricks made major strides in expanding its business while maintaining profitability.
- Duolingo – This edtech company successfully balanced rapid user base growth with monetization strategies like premium subscriptions and ads.
Startups like these have shown their adaptability, operational efficiency, and a clear focus on building sustainable businesses.
A New Playbook: Understanding the Rules of the Game
VC investing has long been synonymous with high-risk, high-reward. But what happened this year has shown that a fundamental shift is taking place.
Investors and founders are now operating under a new set of rules. Gone are the days when VCs chased sky-high valuations and exponential user growth with little regard for profitability.
The new environment rewards sustainable growth, profitability, and operational excellence.
Founders who have survived these challenging years understand that attracting investment now requires demonstrating a clear path to profitability and cash flow.
VCs are scrutinizing startups with a sharper lens, focusing on strong unit economics, customer retention, and cost discipline.
Metrics and KPIs: The Cornerstone of Success
In the past, startups often won over VCs with impressive user growth and the promise of future dominance in their respective markets.
However, the criteria for success have evolved.
Today’s investors demand a deeper understanding of the core metrics that drive a business. This shift places an emphasis on metrics such as customer acquisition cost (CAC), lifetime value (LTV), and gross margins.
VC’s are now focused much more on startups that have a CAC to LTV ratio of at least 3:1. And companies that have gross margins of 70%+.
Founders who can deliver on this and drive sustainable growth with a clear path to profitability are more likely to secure funding.
The days of chasing growth for growth’s sake are over, replaced by a more disciplined, results-driven approach to investing.
Extensions Over Full Rounds: A Common Trend
Another noticeable shift in the venture space has been the prevalence of funding round extensions over full-sized rounds.
In the past, large rounds were often seen as a sign of strength and confidence in the market. However now many founders are opting for extensions to their existing rounds rather than pursuing new, full-sized rounds.
In 2023 nearly 25% of all venture capital deals were extension rounds rather than full new rounds. And this trend has continued into 2024.
This seems to stem from caution on both sides. Founders want to ensure they have enough runway without overextending themselves, while investors are hesitant to deploy large sums of capital without clearer market stability.
Extensions offer a more conservative approach, allowing startups to continue scaling while avoiding the pressure to spend rapidly.
These smaller, incremental funding rounds reflect the new reality: slow, steady growth over rapid, unsustainable expansion.
The Divide in VC Fund Performance
While many great startups have survived and even thrived, not all VC funds fared well.
The market conditions of the past year have created a distinct divide in performance between funds that adapted and those that did not.
Many funds, particularly those that overextended or focused on high-risk sectors without proper due diligence, are struggling to show results.
These funds are likely to face difficulties when attempting to raise new capital in the coming years.
On the other hand, VC funds that remained disciplined in their investment approach, backed companies with solid fundamentals, and adjusted to the changing market dynamics are well-positioned to deliver strong returns.
For example, the top quartile of VC funds still delivered IRRs of over 20%.
For limited partners (LPs), this divide means becoming more discerning in their fund allocations. The next few years will likely see LPs gravitate towards funds that have demonstrated consistent, reliable performance.
I still think VC has the potential to be very lucrative
Despite the challenges of the past year, VC investing remains lucrative for those willing to play by the new rules.
The landscape has certainly changed, but within this transformation lies immense opportunity.
Startups that have proven their resilience and VCs that have remained disciplined are well-positioned to thrive.
The key takeaway is that VC investing is no longer just about identifying the next big thing. It’s about finding companies that understand sustainable growth, have a strong approach to metrics and KPIs, and can navigate economic headwinds.
As the VC ecosystem matures, the potential for outsized returns remains, but only for those who can spot the startups that are truly built to last.
Do you want to work with us?
There are a variety of ways of working with us. The easiest way is if you are considering angel investing then have a look at iclub.vc.
This is our angel network that consists of 1,000+ angels in 40+ countries and growing. iClub is backed by TA Ventures and is a great place to start for first time angel investors.
There is a simple form to fill out on the site and after being qualified you will have access to our exclusive deal flow.
If you’re interested in TA Ventures than you can see our team here and you can reach out to the person that you feel is most appropriate to your inquiry: https://taventures.vc/team/.