View past editions of the Data Minute Newsletter by Carta.
Try: , , , , ,
Peter Walker · 28 June 2024
Q2 valuations gently rise
Q2 just ended - but we already have fresh figures for you.
Our First Cut report looks at median valuations and round sizes from Seed through Series E across the 45,000+ startups on Carta today. We break out each stage individually (and don't miss the download at the end to see primary vs bridge rounds as well)
Valuations continued to rise, albeit gently and not uniformly across stages
Round sizes seem to have plateaued in many places
The long-awaited arrival of clear positive news may again be delayed another quarter (or half year). Yes, valuations have risen but total fundraising is still rather lukewarm.
Full data, including those fundraising totals, will be released in early August - stick with us!
Subscribe here if you're new to the Data Minute. Forwarding encouraged!
Let's talk about startup equity—specifically the need to exercise your options in order to own a portion of the business.
Data we just compiled from the 1.5 million employee equity holders on Carta showed that more than half of vested options that were in-the-money (e.g. actually worth something) were not exercised before they expired last year.
So startup employees, who very likely joined their startup in part for the upside of equity compensation, are not taking full advantage of that very upside.
Now, of course, this is complicated. Maybe the employees had better things to do with their cash than purchase their options. Maybe they have a better read on the business and don't love its prospects anymore. Maybe a lot of things.
But with layoffs rising and startup tenures being rather short to begin with, it begs the question: are startup employees preparing correctly to take advantage of their equity opportunity?
The basic case is this: most options have a 90-day clock for exercise that starts the moment an employee leaves the company (whether by choice or through layoff). And a large majority of employees leave before their initial 4-year grant has finished vesting. So almost all startup talent will come to a point where they have to pay to exercise or lose the upside.
Whether buying those options is right or not, preparing to buy them is a must.
Get the word out with your startup employees friends!
New to Data Minute? Subscribe here for one venture insight per week. Forwarding encouraged!.
Seed valuations rose to new highs: The median pre-money valuation across both primary and bridge rounds at the seed stage climbed to $16 million in Q4, the highest quarterly figure dating back to at least 2016. Competition among investors to gain access to the most appealing early-stage investments remains fierce.
Dilution declined at most stages: The median dilution level on new funding rounds decreased in Q4 at every major fundraising stage except for seed, where it held steady. At some stages, the landscape has changed considerably: Median dilution on Series B rounds was 15% in Q4, compared to 18.6% a year earlier.
Startup M&A became more common: Startups on Carta were the target in 642 M&A transactions during 2024, the highest annual total of the past six years. Amid a slower exit environment, some companies are still finding ways to generate liquidity for their shareholders.
The full report is worth your time - and please don't hesitate to reply here if you'd like to Excel file behind these charts, should you want to create your own visuals.
Onwards!
Subscribe here if you're new to the Data Minute. Forwarding encouraged!
Mega funds raise most of the money and invest it into expensive seed rounds (and every round after). Emerging managers raise…less…of the money, invest it into seed rounds with more reasonable entry prices, and often suffer more dilution over the journey.
And yet - both can work. And they are fundamentally different products to be sold to LPs.
I think part of this never-ending debate comes down to language. Venture capital used to refer to a specific, adventurous type of risky investment into companies without much proof. Now it covers that + billion dollar slugs of capital into the most proven companies outside of the S&P500.
Perhaps the biggest change is simply the number of funds. If an LP needs to be in the top quartile (cough top decile cough) to outperform public markets in early-stage venture, they may need to consider 1,000+ funds in order to see enough of the market to make the best manager selections.
In any case, run your strategy. Find your believers in the limited partner world. Multiple games can be played in startups!
Onwards.
Subscribe here if you're new to the Data Minute. Forwarding encouraged!
Cheers,
Peter Walker
Carta Insights
Peter Walker · 18 May 2023
Seed valuations by sector
The key insight this week
We (sorry, I) often fall into the pattern of speaking about startup valuations as a single number or perhaps a range of values. "The median seed-stage valuation in Q1 was just about $13 million" - see? It's easy.
But visualizing the distinctions between startup sectors reveals that underneath the one big number there are several different mini-markets, all governed by their own quirks.
So which sectors are garnering the most attention at the moment?
Number of rounds
Enterprise SaaS, biotech, fintech, and healthtech all saw over 30 seed rounds raised by Carta companies last quarter. Those sectors typically receive the most attention from investors, so nothing new there.
Valuations
Video games came in with the highest median pre-money valuation in Q1 (just below $20 million). Biotech and data analytics companies also saw healthy valuations in their rounds. A few lagging sectors like edtech and personal products saw valuations dip below the $10 million median.
Cash Raised
Seed rounds in transportation received the most cash per round (unsurprising - would bet that industry takes a lot of upfront capital). Most sectors clustered around the $3 million mark for median cash, with marketplaces and real estate bringing up the rear.
It's useful to have a broad sense of how the seed market is moving. But when it comes to an individual round, you have to dig deeper into the data for relevant benchmarks.
Speaking of seed rounds - they are damn expensive! Founders spend between $40,000 and $75,000 just to close their first priced round. Essentially 2%-4% of the total cash raised flies out the door before the digital ink is dry.
New to Data Minute? Subscribe here for one venture insight per week. Forwarding encouraged!