In 2021, it was felt as if every startup is capable of raising money at an inflated valuation regardless of its size, sector, or underlying business model. Today, things look very different.
When comparing pre-money valuations, across all startup fundraising stages except seed, median valuations declined last year compared to 2022, according to data from PitchBook. Things were slightly better in 2022, when only late-stage and growth-stage median valuations declined relative to 2021, while early-stage median valuation continued to rise.
Things aren't looking so good this year either. A recent TechCrunch+ survey of more than 40 investors found that very few VCs actually expect valuations to rise again this year. In fact, many VCs said valuations will continue to fall, while others think we're already at the bottom.
However, they all agreed on one thing: In 2024, stage and sector will matter more than ever in determining valuation trends.
Early stage
When the market began to turn in 2022, seed and early-stage valuations did not decline as quickly as in the later stages, because younger startups are more isolated from public markets. Because of that delay, some investors believe there is still room for seed valuations to decline.
Kirby Winfield, founding general partner of Ascend, predicted that seed valuations will likely continue to fall by 5% to 10% before normalizing. Drew Glover, general partner at Fiat Ventures, also believes we haven't hit rock bottom yet.
“In the early stages, we will continue to see those valuations come back down to earth, but overall, we will settle into a position where everyone feels that it will provide value to investors and also to the employees of those companies,” Glover said. saying.
