The startup world is weird right now.
If you're looking to sum up that weirdness, I think the chart below does a decent job.
Take that first column named Priced Seed. It shows that median valuations for seed-stage startups are 37% 𝗵𝗶𝗴𝗵𝗲𝗿 than they were in the first half of 2021. Yet there are 38% fewer rounds actually getting signed.
This gap persists in Series A and Series B, and then vanishes in the later stages where valuations and volume have declined in lockstep since the boom times ended.
What's up?
Seed-stage valuations (as explored in some prior posts) have little to do with the underlying value of the business. They are prices dictated by belief in specific founders, first and foremost.
Early-stage venture is actually getting crowded. Investors have moved earlier and earlier and the competition for the "best" rounds is fierce. Odd to think about given a 50% decline in total rounds, but true.
We shouldn't expect round volume to approach the peaks of '21-'22 anytime soon, even with all this "dry powder" waiting to be deployed.
No IPOs puts a lid on late-stage venture. Liquidity is a must-have for that part of the market to function properly.
Yes, some of this is down to AI frenzy at the early stages. But even if you remove AI companies, valuations at say Series A have not fallen in tandem with volume.
Weird times 🤷
#startups #founders #venturecapital #fundraising
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