Median pre-money valuations have risen dramatically over the past few years. In 2009 seed stage companies were being valued at $2.6 Million. In 2013 seed stage company valuations have jumped to $5.2 Million.
In a report from Pitchbook, the increase in valuations is being presented as exacerbating the “Series A Crunch”.
Pitchbook has found that the median pre-money valuation for all companies at the seed stage has doubled over the last four years from $2.6 million in 2009 to $5.2 million through the first three quarters of 2013. The data show that Series A valuations are also increasing, but at a slower rate—from $6.6 million in 2009 to $8.9 million through the first three quarters of 2013. High seed-stage valuations are likely having a major effect on startups’ ability to raise a subsequent Series A round, as investors at the seed stage want to see appreciation in their investment but Series A investors often believe that the valuation at the seed round was unduly inflated.
With capital requirements for starting companies lower than 5 years ago – largely due to advances in technology – there has been growth in seed stage funding but a decline in early stage and later stage fundings.