Since the tech downturn began to affect startups, one question kept popping up: what if we witness a correction?
The question implied that the way deals were closed in recent years, mostly in late 2020 and almost all of 2021, was the exception, not the rule, and venture capital was returning to normal. But what exactly does that mean?
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Well, the frenetic environment for closing deals in 2021, in which generous valuations were handed out, was no longer the ideal one could hope to return to. In retrospect, investors and observers began to recognize that a market in which due diligence was often sidelined was not healthy.
Valuations are a trickier subject. VCs love a good deal, but they also don’t want to lose money on past investments. Yet it is slowly becoming clear that the valuations of many startups had gotten out of hand for a while. With crossover funds largely out of the picture, maybe we can nurse our collective hangovers together and pretend 2021 never happened.
The problem, however, is that the venture market won’t just bounce back to 2020 levels, at least not in all respects. Today we take a deep dive CB Insights’ report on trends in the first quarter of 2023showing that the share of megarounds and late-stage deals is at its lowest point in years.
Fewer late-stage deals are a cause for concern
And that’s an understatement. The past quarter had since recorded the fewest company rounds ever (7,024). the second quarter of 2020according to CB Insights, in addition to a 12% decline from Q4 2022.
This fact alone could indicate that we are in a market correcting to 2020 levels, but breaking down the data reveals a more worrying picture.
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.