Fewer VC Rounds at Higher Valuations Describes the Market

Lots of debate around "what's happening in VC-backed startups" but the market is actually dead easy to describe:

Fewer rounds at higher valuations.

Meaning fewer companies are actually raising (or getting to raise) venture capital, but those that do get big rounds at high prices.

𝗪𝗵𝗮𝘁 𝘁𝗵𝗲 𝗱𝗮𝘁𝗮 𝘀𝗮𝘆𝘀

• Black line is change in median valuation compared with Q4 2021, the old bubble peak.

• Orange line is change in total rounds raised compared with Q4 2021.

• At seed, valuations are 30% higher than the old peak while round volume has been cut in half.

• At Series A, valuations are just about at peak while round volume is down 60%.

The "why" is, of course, a bit more interesting.

Part of it is investor expectations rising. What a "good" company looks like is different today than in 2021.

Part of it is dynamics amongst funds themselves, with bigger funds playing in earlier stages and crowding out emerging investors in consensus deals.

Part of it is "consensus" itself as never been more...consensus-y. The most legible founders with the right background and networks are competed over like diamonds by every investor, which leaves less time and attention for anyone not in the sun.

Is this healthy? I'd say not really.

Are we headed for a sharp valuation reversal in 2 years as some AI hype fades and many companies prove unable to justify the high valuations? Yea, I bet we are.

But that's the game on the field at the moment.

#startups #founders #venturecapital