What the Hell Is Happening With Startup Valuations

What the hell is happening with startup valuations?

Left chart - change in median primary round valuations compared with Q1 2021:

• You can see that early stages (Seed in the black line, Series A in the navy) are decently above their Q1 2021 marks.

• For the rest of venture, especially the later stages, median valuations for new primary rounds remain well below the boom times.

Left chart - change in median primary round valuations compared with Q1 2023:

• Early stage valuations are higher than the beginning of last year, but not substantially so.

• Series D (light blue) and Series E+ (purple) have rocketed upwards in the past 12 months (and volume of rounds is rising over that period).

So much of the vibe around startups is dictated by the frame of comparison. Founders and investors comparing today to the peak may feel gloomy, while those same people would be pretty optimistic if the reference point is only 12 months prior.

Of course, the major uncharted variable here is number of rounds. From Q1 2021, the number of rounds per stage is down between 36%-70% (youch, late stage).

From last year though, round volume is essentially flat for earlier stages and actually up for late-stages (off of very low lows).

Leaves me with two major takeaways:

1. Valuation is almost never an actual judgement of the intrinsic value of a company, especially at the early stages. It is buffeted by the market, by investor economics, by a thousand variables.

2. Vibes matter - and I think 2024 has a better look to it than 2023 ever did.

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