On September 12, 2023, you’ll be upgraded to the latest version of Equidam with updated valuation parameters. This may result, on average, in a slight valuation decrease.

What’s changing

1 | Average valuations used in the Scorecard Method and maximum valuations used in the Checklist Method

We base our estimates on real transactions by country since June 1st, 2020. Whenever we were not able to find a significant amount of real pre-money valuations in a given country, we broadened our perspective to the closest larger geographic entity (namely, continental region and continent). You can refer to the table at this link to see how they will change for your country specifically.

General comments on the effect of the changes

In Q1, nearly 20% of venture rounds secured lower valuations compared to the company’s previous round, marking a 3.6-fold increase from the previous year and the highest rate in the past five years. This surge is attributed to ongoing valuation declines across various startup stages and extended periods of depressed valuations over multiple quarters. Some firms that had postponed new fundraising to avoid down rounds are now reaching the end of their financial resources, leading them to opt for lower valuations as a pragmatic choice to prevent running out of funds.

Median pre-money valuations have decreased across all startup stages in the past year, with the decline being more pronounced in later stages. An exception is Series B, experiencing a substantial 44.22% drop from a year ago, surpassing the 30.25% decrease at Series C. Notably, valuations in most stages showed slight improvement or stability in Q1, suggesting a potential stabilization in the valuation environment after a period of volatility lasting over a year.

In Q2, the frequency of venture investments exceeding $50 million increased to 5.9%, up from 4.8% in Q1. However, this positive development fails to completely counterbalance the broader and more recent downtrend in such high-value deals. Notably, the Q2 witnessed a stark contrast, with deals exceeding $50 million appearing more than twice as scarce compared to any quarter observed throughout the entirety of 2021. On a different note, the median seed valuation experienced an upward trajectory, reaching $13.7 million in the second quarter—a modest 5% escalation from the first quarter. While this figure pales in comparison to the zenith of $15 million noted in the initial nine months of 2021, it still stands significantly higher than the levels noted prior to the year 2021. Meanwhile, a consistent and concerning trend emerges as the count of seed investments continues to decline consecutively for the fourth successive quarter.

Looking at the country-level data represented here, it’s therefore unsurprising to see quite a lot of red. Similar to our last update back in February, the Checklist valuations – the regional maximums – have taken the brunt of this while the averages have held up better. This broadly reflects the trend in valuations over the past few quarters, where the 75th percentile has seen the largest fall. Established startup hubs like the US and the UK have remained remarkably flat, while Europe has a fairly mixed-bag of results – but nothing too dramatic. Less well established hubs, which benefited less from the peaks during COVID, and may have suffered more immediate consequences from the pull-back of capital this year, have been hit harder. Latin America, particularly, has seen quite a fall in valuations in this update, reflecting a brutal few months for that ecosystem. Even the more established ecosystems like Brazil have struggled.

The Middle East has remained particularly strong, with continued growth for key countries, Saudi Arabia, United Arab Emirates, Turkey, Qatar, and Kuwait, across both average and maximum valuations. This lines up well with stories of VCs in both the US and Europe looking to that region for capital, as limited partners elsewhere became less enthusiastic about the venture capital asset class; it makes sense that those domestic ecosystems would continue to thrive.

Please don’t hesitate to let us know if you have any questions. Thanks for using Equidam!

The Equidam Team