19 Percent of Venture Rounds Are Down Rounds in 2023

19% of venture rounds are down rounds in 2023.

That's up from only 5% down rounds in 2021.

And these down rounds are seeing companies take significant haircuts vs the prior valuation (anywhere from 30-60% drops).

Nobody's idea of a good time.

Of course, company valuations in the public market decline all the time so I believe the stigma of a down round in private tech is a bit unwarranted...but I digress.

First off - just how common are down rounds today?

If you focus on the black bars in the chart below, they illustrate the percentage of all rounds in a given stage and year that were down rounds.

For Series A, the percentage jumps from 8% to 16% year over year.

Series B 8% --> 14%

Series C 8% --> 19%

Series D 13% --> 31%

Series E 15% --> 24%

Youch.

But the frequency of these down rounds isn't the only metric we care about. We're also interested in how much the valuation declines for each company. So now focus on the salmon-colored bars.

The median post-money valuation decline in a down round for a Series A company is -34% this year.

The median decline in a Series E down round? -56%.

Obviously you'd expect the declines to increase as a company gets later stage (since they are closer to the public markets which have not been kind to tech companies over the past year + some recent IPOs failing to take off) but damn. A 56% haircut is no joke.

These are difficult moments in a company's lifecycle. They require a ton of explaining - to new investors, to current investors, to the wider employee base. But there are many examples of startups achieving major exits after undertaking a down round - so hang in there 🙏

#cartadata #downround #startups #founders #fundraising #venturecapital