startup valuations

The startup and venture markets are coming back to square one • ZebethMedia

By zebethcontrolPosted on November 14, 2022Posted in EC Newsletter, EC venture capital, Startup Trends, startup valuations, Startups, The Exchange, VentureNo Comments

What goes up must come down” is a cliche that is also a bastardization of Newton’s third law. It’s also a good reminder that when it looks like the business market has changed fundamentally, we’re often really just seeing a temporary aberration. This idiom rings true when we consider the cycle of tech valuations (up and then down), venture capital (up and then down), and the pace at which new unicorns are being minted (also up and then down). These three trends are linked, obviously, but what gave us pause recently was the realization that we haven’t merely seen declines in recent quarters: instead, there’s been a whole-cloth return to pre-COVID norms. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. Take tech valuations, for example: It struck us this morning while drafting the weekly kick-off Equity episode that the value of tech stocks — measured through our favorite software-company tracking index — is today trading around the value it had in early 2020, just before and after the massive COVID-induced sell-off hit American stocks: Please excuse our annotation method — it’s Monday. It’s clear that the 2020-2021 boom in software valuations was more of an anomaly than a new-normal. Besides, the fact that the companies in the index grew over the last few years but are worth less today implies that they might have been overvalued even pre-COVID. If today’s prices hold up, they will indict not only the excess of the recent past, but the overvaluations of the 2010s as well.

VCs decipher the recent fintech layoffs — and why they’re happening now • ZebethMedia

By zebethcontrolPosted on November 4, 2022Posted in Chime, EC Fintech, EC venture capital, Fintech, Layoffs, startup valuations, Startups, stripe, tech layoffsNo Comments

Many big companies in the fintech world cut jobs in the past month. And yet Stripe’s announcement it would lay off 14% of its workforce still made a splash, proving that unicorns and decacorns are not immune to the challenging economic and fundraising conditions. The Stripe news closely follows Chime confirming this week that 12% of its employees would be laid off and Brex revealing last month that it was cutting 11% of its workforce. So what the heck is going on here? Well, according to Spiros Margaris, a fintech venture capitalist and founder of Margaris Ventures, the current layoffs by some of these larger fintech companies were “caused by the challenging geopolitical market environment and inflationary pressures. It affects the whole fintech startup industry — and globally all industries — since the prominent players have a strategic ripple effect on the smaller players.” “Laying off good employees endangers their strategy to succeed in the grand vision they initially sold to the VC.” Spiros Margaris, founder of Margaris Ventures Cameron Peake, a partner at Restive Ventures who recently invested in AiPrise, concurred, noting via email that much of what we are seeing today “were the dynamics we saw play out last year,” including all of the “large funding rounds, sunny market projections and a belief that companies needed more people to fuel their growth.” What resulted was “a lack of discipline around company fundamentals,” she added. While the frenzy was dissipating, it was then that companies “realized they were not only ahead of their skis but that they needed to cut back in order to focus more on profitability,” she said.

Welcome to the late-stage discount market, where everything is on sale and few folks are buying • ZebethMedia

By zebethcontrolPosted on November 2, 2022Posted in cb insights, EC Newsletter, EC venture capital, startup valuations, Startups, The Exchange, Venture, venture capitalNo Comments

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 farther along the alphabet a startup’s next funding round is, the more valuation pressure that transaction will be under from a price perspective. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. 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. 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.

Why Q3’s median valuations actually make perfect sense • ZebethMedia

By zebethcontrolPosted on October 23, 2022Posted in EC venture capital, PitchBook Data, startup valuations, Startups, Venture, venture capitalNo Comments

Valuations have been top of mind for the entire venture industry this year as many VCs try to navigate their overvalued portfolios and founders scramble to conserve cash and grow into their lofty valuations. So one might have predicted that valuations would fall off a cliff this year. But that hasn’t happened because venture investing just isn’t that simple. First, let’s look at the numbers: According to PitchBook data, the median seed deal pre-money valuation in the United States was $10.5 million, up from $9 million last year. The median early-stage valuation through the third quarter of this year was $55 million, up from $44 million last year. The median late-stage valuation was $91 million, down from $100 million in 2021. It might seem silly that valuations are continuing to climb for some stages — especially after investors made it seem like they were crazy for coming in at last year’s prices, and, of course, in some ways, it is — but it also makes a lot of sense. Kyle Stanford, a senior venture capital analyst at PitchBook, told ZebethMedia that for one, we can’t forget about those record levels of dry powder. “There has been such growth over the past few years of the multi-stage investors or Andreessen [Horowitz] and Sequoia that have billion-dollar funds investing in early stage,” Stanford said. “The amount of capital that is still available for early stage is still really high and a lot of investors are still willing to put top dollars into deals.”