If you are raising money for an early-stage startup today, there’s reason to be hopeful when it comes to the price that you might be able to charge for shares in your company. The later-stage your startup is, however, the worse your chances are to raise funds at a price that you like.
New data from CB Insights indicates that, on a global basis, the further down the alphabet a startup’s next funding round is, the more valuation pressure that transaction will be under from a price perspective.
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The data is surprising in how clear it is in trend terms, but not too surprising. Recall that mega-rounds, or venture capital deals worth $100 million or more, have fallen precipitously this year. And while median deal size through the third quarter has been flat in the early- and mid-stage startup market, late-stage deals have gotten smaller this year.
With that backdrop, falling late-stage valuations are hardly surprising. Venture investor and SaaS aficionado Jason Lemkin had this to say today:
My summary of Venture Markets in Nov 2022: Series B and later even worse than looks in data: 85%+ of investing here has simply ceased[.]
Lower volume implies less demand; less demand implies less competition around deal price; less competition means lower prices.
Welcome to the late-stage discount market, where everything is on sale and few folks are buying by Alex Wilhelm originally published on TechCrunch