Startup Valuation Delta: H1 2025

Valuation trends for pre-seed startups in H1 2025 show a slight recovery from the lows of 2023, though average figures remain below those seen in the highs of early 2024. This suggests that while optimism—especially around generative AI—temporarily lifted valuations, persistent market uncertainty has limited the strength and duration of the rebound. This ongoing hesitancy stems from the concentration of venture capital into a narrow set of clear AI winners, leaving less room for risk-taking in the broader early-stage landscape. As a result, the average pre-seed startup still struggles to command the kind of valuation multiples seen during the 2021 bubble or even the 2020–2022 AI acceleration.

The corresponding trend in dilution paints a complementary picture. After hitting an all-time low in Q4 2021, dilution peaked in Q4 2022 amid investor caution and falling valuations. From there, it declined steadily into Q1 2024, boosted by renewed enthusiasm for AI and a broader sense of recovery. However, by mid-2025, dilution has begun to climb again—nearing the levels last seen in mid-2023. This increase suggests founders are conceding more equity to secure funding, again pointing to weakened investor competition and uncertain deal dynamics.

Regional shifts in pre-seed valuations over the past few years highlight a notable reshuffling in the global early-stage funding landscape. While the United States continues to lead with the highest average valuations, the Middle East has firmly established itself as the second most valuable region, overtaking Europe—a position it held historically—thanks to stronger economic growth, political stability, and a more consistent fundraising environment. Europe has slipped to fourth place, now trailing Oceania, which posts higher average valuations despite its smaller ecosystem. Meanwhile, Latin America, Southeast Asia, and Africa remain clustered at the lower end, with average pre-seed valuations between $2.1M and $2.2M. These shifts reflect both investor confidence and the varying maturity levels of startup ecosystems globally.

Industry shifts in early-stage valuations and dilution highlight a divergence in capital needs and investor confidence across sectors. Energy/Climate and Healthcare/Pharma are the most capital-intensive, with high average raises and correspondingly high dilution (18.9% and 16.9%, respectively), reflecting investor willingness to fund long-term innovation in exchange for greater ownership. Finance leads in pre-money valuation at €9.1M and maintains moderate dilution (14.2%), showing continued investor interest in fintech with relatively favorable founder terms. Software & IT and Other sectors demonstrate more conservative funding patterns and lower dilution, aligning with their capital-light nature. An outlier is Food and Drink, with an unusually low dilution of 1%, likely due to atypically small raise sizes or alternative deal structures. These patterns reflect both sector-specific funding dynamics and shifting investor priorities in early 2025.

The comparison between H1 2022 and H1 2025 reveals a gradual shift in the purpose of startup valuations, signaling a maturing market. While fundraising remains the dominant reason for valuations, its share has declined slightly from 68.3% to 62.8%, suggesting that valuations are no longer driven purely by growth-oriented capital raises. In contrast, M&A-related valuations have risen from 7.5% to 11.0%, reflecting a growing trend of startups “building for acquisition” by aligning more deliberately with potential buyers and exit opportunities. Meanwhile, secondary share sales have increased from 11.7% to 14.5%, driven by the “private-for-longer” environment, where startups stay private longer and provide liquidity to early employees and investors through secondaries. This trend also supports employee retention in the absence of traditional exit events. Employee equity planning has remained relatively stable, slightly dipping from 12.5% to 11.6%, indicating that while it remains an important internal tool, it's not a growing use case for valuations. Overall, this shift points to a startup ecosystem that is evolving from pure capital accumulation toward return realization and strategic outcomes.