The key insight this week
Our full State of Private Markets report for Q1 should drop next Tuesday - but we couldn't keep the headline from our loyal readers.
It's not a fun headline. Down rounds accounted for nearly 20% of all rounds completed by companies on the Carta cap table platform in Q1.
Typically, down rounds hover around 10% of rounds. In the high times of recent years, that percentage fell to a record low of 5.2% in Q1 2022.
As you can see in the chart above, that's some real valuation whiplash. Founders looking for funding in order to keep their companies afloat are now willing to accept that valuations assigned in 2021 may no longer be viable in 2023.
What's more, this increase in down rounds was paired with a simultaneous increase in rounds where investors were granted participating preferred stock. This is a logical outgrowth of the power dynamic swinging back to VCs after the ecosystem as a whole grew more founder-friendly in recent years.
More down rounds. More rounds with onerous terms. Fewer rounds overall. Here's to the founders sloughing through it all!
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Peter Walker
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