In 2021, I felt… Like every startup, it has been able to raise inordinate value regardless of its size, sector, or core business model. Today, things look much different.
Comparing pre-funding valuations, every stage of startup fundraising except seed saw an average decline in valuations last year compared to 2022, according to data from PitchBook. Things were slightly better in 2022, when average late-stage and growth-stage ratings only declined from 2021, while the average early-stage rating continued to rise.
Things aren’t looking too good this year either. A recent TechCrunch+ survey of more than 40 investors found that very few venture capital firms actually expect valuations to rise again this year. In fact, many venture capitalists have said that valuations will continue to decline, while others believe we have already hit the bottom.
However, they all agreed on one thing: in 2024, stage and sector will matter now more than ever for determining valuation trends.
Early stage
When the market began to turn in 2022, seed and early-stage valuations did not decline as quickly as late-stage, because younger startups are more isolated from public markets. Because of this delay, some investors believe there is still room for seed valuations to decline.
Kirby Winfield, founding general partner at Ascend, predicted seed valuations will likely continue to decline another 5% to 10% before they return to normal. Drew Glover, general partner at Fiat Ventures, believes we haven’t hit the bottom yet.
“In the early stages, we’ll continue to see those valuations come back down to earth, but overall, they’re settling into a position that everyone feels is going to provide value to investors and to the employees of those companies as well,” Glover said.