2021, feeling Just like every new startup has been able to raise money at inflated valuations, regardless of its size, industry, or underlying business model. Today, things look very different.
PitchBook data shows that compared with pre-money valuations, the median valuation of every new startup financing stage except seed last year fell from 2022. Things are slightly better in 2022, with only the median late-stage and growth-stage valuations declining from 2021, while the median early-stage valuations continue to rise.
Things are not looking good this year either. A recent TechCrunch+ survey of more than 40 investors found that few venture capital firms actually expect valuations to rise again this year. In fact, many VCs say valuations will continue to fall, while others believe we’re already at the bottom.
However, they all agree on one thing: By 2024, stage and industry will be more important than ever in determining valuation trends.
Early days
When the market begins to turn in 2022, seed and early-stage valuations will not decline as quickly as later stages because young startups are more insulated from public markets. Because of this delay, some investors believe there is still room for seed valuations to decline.
Ascend founding general partner Kirby Winfield predicts that seed round valuations will likely continue to decline by 5% to 10% before normalizing. Drew Glover, general partner at Fiat Ventures, also believes we haven’t hit the bottom yet.
“We’re going to continue to see those valuations come back to reality in the initial stages, but generally stay in a position where everyone thinks they’re going to provide value to investors and the employees of these companies,” Glover said.
