The percentage of down rounds has increased to a four-year high, according to a recent report by Pitchbook.
According to the report, the environment is very “investor friendly” as valuations have gone into reverse. Pitchbook says that “non-traditional investors” drive valuations, and this crew has moved their money elsewhere and away from more risky ventures.
According to the data, in the first half of 2023, only $62.9 billion of US VC deal value involved nontraditional investors, a decline from $122.4 billion in comparison to the same period in 2022.
Interestingly, the report claims that the median seed deal size remains at a record high of $2.9 million. At the same time, the 2023 year-to-date median pre-money valuation of $10.8 million is slightly higher than the 2022 full-year figure but below the quarterly peak in Q1 2023. In Q2, the median seed pre-money valuation was $10.0 million
Year to date 2023 median early-stage pre-money valuation was $38.0 million.
Pitchbook says that “valuations for startups sitting close to the end of the venture lifecycle were compressed.”
High inflation, accompanied by rising interest rates, have put a damper on the private equity market as it is safer to park your funds in someplace less exciting but far less risky. With many bank deposits over 4% or even 5%, this is looking pretty attractive in the dicey economic environment.