The comedown from venture capital’s torrid 2021 is sparing few startups.
New data from Carta, a provider of shareholder management services to private companies, indicates that the slowdown in venture capital activity is not constrained to a single stage or sector. Instead, aggregated information detailing a host of Q1 2022 data points from Carta’s Head of Insights, Peter Walker, indicates that even less mature startups will not prove immune from a retreat in private market investment.
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The value of technology stocks began to decline in late 2021, a slide that continued into 2022, leaving many tech shops trading at a stiff discount to their recent valuation highs. Given that late-stage startup valuations are the most easily compared to those of public companies, it was expected that growth-stage investors would shake up their pricing models and perhaps reduce their risk appetite.
Earlier-stage startups were expected by some to fare better than their later-stage brethren. However, the impacts of public-market valuation changes — repricing forecasted exit values for startups, which can change their value in private investment rounds — are trickling down more than some expected. (TechCrunch explored part of this phenomenon over the weekend.)
And while there is talk among investors regarding how expensive some very early-stage rounds are, from seed on up, it appears that no startup is safe from the slowdown’s effects.
Measuring the slowdown by series
Measuring the impact of a slowdown is harder when it comes to private companies. By definition, their financial information is private, meaning that we can’t know much about their revenue, margins and varying profit metrics, which, in the case of pre-revenue companies, wouldn’t be very terribly pertinent anyway.
This makes Carta’s data particularly relevant for us: It provides us with the number of rounds and total capital raised by series for startups in the first quarter. The caveat is that the data only covers startups using the platform, but we haven’t singled out a factor that makes them necessarily different from their counterparts who don’t use Carta.
Let’s take a closer look at the data before unpacking what it means. The number of rounds by series on Carta: