Why are seed stage valuations immune to decline?
Take a look at median pre-money valuations for each venture stage compared to where they were in Q1 2020. These are primary rounds only (15,000+ rounds).
The late stages (Series C and D) went bonkers in 2021. The median Series D company in Q3 2021 was valued at over 3x what they would have been in Q1 2020.
Then, as we know, everything collapsed. The big rounds went away, fundraising got much harder, and valuations across venture fell off a cliff.
Except for the seed stage.
Seed valuations peaked in Q2 2022 at 81% above Q1 2020 levels. Today, they are all the way down to...74% higher than Q1 2020. Basically as pricey as they've ever been!
Now, to be fair, the number of companies getting these robust valuations at seed-stage has come down a lot. Fewer rounds happening across the board. But that dynamic is true of the other stages as well, so doesn't fully explain the seed resiliency.
𝗦𝗼𝗺𝗲 𝗶𝗱𝗲𝗮𝘀 𝗮𝘀 𝘁𝗼 𝘄𝗵𝘆:
More cash raised for seed-stage funds in recent years means the most competitive deals have a lot of suitors.
Seed stage is far enough away from IPO that dreams remain intact.
Lots of activity happening on SAFEs and other instruments before priced seed, so companies may have been de-risked further than your average 2020 company would have when raising.
Any way you look at it, prices in seed-stage companies are relatively "expensive", at least compared with the significant drops we've seen in other parts of the venture stack (and indeed in public markets).
If you're looking for the exact valuations for each stage for Q3 2023 - don't worry. We'll be publishing our First Cut of Q3 valuations data in 2 days. Sign up at the link in graphic for your own special copy!
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