---
title: "Mean Reversion: When Will Startup Investing Return to Normal?"
description: "Data-driven analysis reveals when venture capital activity will return to normal levels, with predictions of 1000 Seeds \u0026 240 Series A rounds per quarter by late 2023."
categories: ["data analysis"]
keywords: ["venture capital","mean reversion","Tomasz Tunguz","startup investing","data analysis","Series A rounds","Seed funding","investment trends"]
ai_summary: "This analysis predicts venture capital activity normalization, estimating 1000 Seed and 240 Series A rounds per quarter by late 2023."
date: 2023-08-21
lastmod: 2026-07-27
canonical_url: https://www.tomtunguz.com/reversion-to-mean-venture-activity/
author: "Tomasz Tunguz"
---

The post-Covid surge in venture capital pushed valuations & activity to record breaking heights. Since then, investing activity dropped precipitously. 

When a collapse follows a surge, mean reversion suggests behavior should revert to a reasonable baseline. By building a linear model we can hazard a guess of when that might be.

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/gyxbcg85zwdvnjj8dow7.png)

The blue line shows actual Seed, A, & B activity by quarter. The red is a linear model based on data from 2010 to 2018 that predicts activity rates for each financing series of US & Canadian software companies. [1]

2021 & 2022 surged above prediction, while 2023 has operated meaningfully below - sometimes 50% below.

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/ccn0z0nd0fexvwlglksp.png)

By looking at the cumulative rounds since 2010, we can see that Seed, A, & B volumes all trended meaningfully above their predicted counts. These rounds remain at elevated levels relative to the model's expectation.

But the gap is narrowing. 

At current trends, actual round counts should revert to the mean sometime in the second half of 2023. The model suggests we should see about 1000 Seeds, 240 Series As, & 65 Series Bs per quarter.


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[1] The R^2 of these linear models are 0.86, 0.67, & 0.47 for the Seed, A, & B models.