Q1 2023 US VC Valuations Report

Q1
2023
US
VC Valuations
Report
Sponsored by
Sponsored by
Contents
Key takeaways 4 PitchBook Data, Inc.
John Gabbert Founder, CEO
Angel and seed 5
Nizar Tarhuni Vice President, Institutional Research and Editorial
Early-stage VC valuations 7
Dylan Cox, CFA Head of Private Markets Research
Late-stage VC valuations 9
Institutional Research Group

A word from Morgan Stanley At Work 11
Analysis
Venture-growth valuations 13
Kyle Stanford, CAIA
Senior Analyst, US Venture Lead
Deals by sector: agtech 15 kyle.stanford@pitchbook.com
Deals by sector: infosec 17 Max Navas

Analyst, Venture Capital
max.navas@pitchbook.com
Nontraditional investors 19
Liquidity 21 Vincent Harrison

Analyst, Venture Capital
vincent.harrison@pitchbook.com
Deal terms 23
Kaidi Gao
Associate Analyst, Venture Capital
kaidi.gao@pitchbook.com
Data
Susan Hu
Senior Data Analyst
pbinstitutionalresearch@pitchbook.com
Publishing
Report designed by Chloe Ladwig
Published on May 10, 2023
Click here for PitchBook’s report methodologies.
2 Q1 2023 US VC VALUATIONS REPORT

Do You Know What Your
Company is Truly Worth?
Whether your company needs an updated valuation to maintain safe harbor,
is making strategic decisions around equity, or is in the process of getting
transaction ready ahead of a future liquidity event, our dedicated valuation
services team can help.
Experienced 409A Valuation Professionals.

A Higher Level of Service.
With more than 60 years of combined

experience, 7000+ valuations and 85+ IPOs
completed to date, our Valuation Services team
provides professional and audit-ready
valuations for companies at every stage of
growth.
Get started today
Morgan Stanley at Work services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and/or its affiliates, all wholly owned subsidiaries
of Morgan Stanley.
© 2023 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 5601781 04/2023
Sponsored by
Key takeaways
Adverse impacts resulting from a liquidity crunch and the million. Concurrently, the median deal size shrunk to just
market turning increasingly investor friendly have trickled $7.0 million as investor appetite and risk tolerance for these
down to the earliest stages of the venture ecosystem. The types of deals waned. As cash runways are depleted, we
median seed pre-money valuation continued its growth expect an increasing number of these startups to resort to
trajectory since Q1 2020, reaching $12.9 million in Q1 2023. raising capital at flat or lower valuations in order to attract
However, this expansion masks a survivorship bias, wherein needed capital.
revenue multiples have reportedly dropped significantly.
Nontraditional investors, crucial contributors of capital to
Declining economic conditions have continued to challenge late- and venture-growth-stage startups, have continued
the late-stage venture market, with the median deal size to pull back from the venture capital asset class due to a
falling to its lowest level since Q2 2017. The demand for lack of liquidity. CVCs remain the exception to this narrative,
capital at the late stage is outstripping supply, with a capital- notching a record participation rate on a deal count basis
demand-to-supply ratio of 3.24x. This is due in part to the exit of 26.5% in Q1 2023. Their participation, along with other
of nontraditional investors, which have been less active in nontraditional investors, has allowed select startups to raise
the venture market, as well as a lackluster exit environment, larger amounts of capital at valuations well above broader
resulting in a substantial decline in startup valuations. The market medians, but it is not without cost as nontraditional
median late-stage valuation in Q1 2023 decreased by 8.3% investors have demanded larger equity positions for their
from Q4 2022, while the median late-stage VVC fell to $9.0 continued involvement.
million, marking the first time it has dipped below $10.0
million since 2018. The challenging fundraising environment The dire state of public exits has continued through Q1
experienced thus far in 2023 is expected to persist, thus 2023, during which only eight companies managed to exit
putting continued pressure on businesses at the top of the via IPO. Despite a 42.3% quarterly increase in the median
venture lifecycle. public listing VC exit valuation in Q1 2023, this figure is
merely a fraction of that of the mid-2021 market exuberance.
Pressure is continuing to build in the venture growth Healthcare startups made up half of public exits in Q1, and
stage, with the IPO window shuttered and investors’ focus we expect to see a rebound in exit valuation when the public
on profitability. As a result, the Q1 2023 median venture- market warms to tech IPOs, which tend to generate outsized
growth pre-money valuation fell to $90.0 million, a dramatic exit value.
decline from the 2021 full-year record figure of $355.0
4 Q1 2023 US VC VALUATIONS REPORT KEY TAKEAWAYS

Sponsored by
Angel and seed

Median angel deal value lowest in decade Seed deal sizes largest in dataset
Angel deal value ($M) dispersion Seed deal value ($M) dispersion
$1.2 $9
$8
$1.0
$7
$0.8 $6
$5
$0.6
$4
$0.4 $3
$2
$0.2
$1
$0.0 $0
2013
2014
2015
2016
2017
2018
2019
2021
2022
2023*
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
Top and bottom quartile range Top and bottom quartile range
Top decile Median Bottom decile Average Top decile Median Bottom decile Average
Source: PitchBook • Geography: US Source: PitchBook • Geography: US
*As of March 31, 2023 *As of March 31, 2023
Sitting at the earliest phase of the venture ecosystem, angel- Median seed pre-money valuation nearly reaches
and seed-stage companies remained relatively insulated $13 million
from the macroeconomic challenges inflicting their late-stage Seed pre-money valuation ($M) dispersion
counterparts. However, adverse impacts from shrunken
$35
capital availability and the market becoming increasingly
investor friendly have started to surface. $30
$25
The median seed pre-money valuation has been on a consistent
growth trend since Q1 2020. The figure rose by 16.9% over $20
Q4 2022 to $12.9 million in Q1 2023 and stands 28.6% above
the quarterly figure of one year ago. Two caveats lie behind $15
the upward trajectory of median seed valuations. First, the
selection bar for deals has gone up. To mitigate risks, GPs are $10
writing checks only to companies with strong fundamentals,

$5
healthy burn rates, and solid strategies to preserve runway.
This survivorship bias is corroborated by the median seed $0
step-up expanding three quarters in a row and ticking up to
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
1.86x in Q1, attesting to how those carefully selected companies

have been able to grow their valuations. The median time from Top and bottom quartile range
founding for seed deals also witnessed a sizable increase, Top decile Median Bottom decile Average
ascending from 2.4 years in 2022 to 3.0 years in 2023 so
Source: PitchBook • Geography: US
far, indicating that more established startups with relatively *As of March 31, 2023
clearer growth trajectories as well as other metrics such as
product-market fit can secure funding amid fierce competition.
5 Q1 2023 US VC VALUATIONS REPORT ANGEL AND SEED

Sponsored by
Seed share acquired highest since Q1 2018

Seed share acquired dispersion by quarter
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2017 2018 2019 2020 2021 2022 2023*

Top and bottom quartile range Top decile Median Bottom decile Average
*As of March 31, 2023
These increased benchmarks naturally reveal a survivorship a slight dip, landing at 25.7% in Q1. During the same period, the
bias in the data, wherein stronger companies are able to raise top and bottom quartile range reached the highest point since
capital, while those that would have received smaller deals and Q2 2020. This widened span points to a broad spectrum of seed
valuations are excluded from the dataset. deals, wherein investors could be asking for more favorable
terms, negotiating more downside protection, and diversifying
The quarterly median share acquired for seed deals experienced investments, as well as forming a syndicate to reduce risk.
Median age of company at seed round hits three years

Median time (years) from founding by stage
3.5
3.2
3.0 2.9
3.0
2.5 2.4
2.0
1.5
1.0
0.5
0.0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Angel Seed
6 Q1 2023 US VC VALUATIONS REPORT ANGEL AND SEED

Sponsored by
Early-stage VC valuations
Early-stage deal sizes continue to dip Median early-stage VC valuation falls to eight-
Early-stage VC deal value ($M) dispersion quarter low
Early-stage VC pre-money valuation ($M) dispersion
$50 $250
$40 $200
$30 $150
$20 $100
$10 $50
$0 $0
2022
2023*
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2013
2014
2015
2016
2017
2018
2019
2021
2020
The median early-stage VC pre-money valuation has declined increases are likely due to startups trying to adapt into a cost-
steadily since the highest point recorded, in Q1 2022. The effective structure, striking a balance between operating lean
figure settled at $38.2 million in Q1 2023, a 5.7% drop from and achieving goals. The top quartile pre-money valuation
the previous quarter and sitting at 63.1% of where it was ascended by 8.2% from Q4 2022, reaching $85.5 million. This
in Q1 2022. The valuation decline is the result of GPs being upward trend further attests to a flight to quality. As investors
more cautious and selective toward dealmaking amid a are focused on ensuring the top performers of their portfolio
liquidity crunch. have sufficient capital to reach key milestones, many are
doubling down on the best-performing portfolio companies.
The trends of GPs slowing the pace of capital deployment
and prioritizing existing portfolio companies over handing Median VVC (defined as the annual increase in valuation
out new term sheets, as well as a record high supply-and- between rounds) slumped and settled at $16.1 million, a
demand ratio at the late stage, led to additional headwinds for sizable 58.7% decline from the 2022 figure. In tandem, RVVC
early-stage startups. Many of these relatively more nascent (annualized percent increase in valuation between rounds)
companies have not developed strong financial metrics yet, slid to 41.9%, an outsized drop from 2022’s 125.5%. Even if
thus making it extra challenging to justify a high valuation. companies have achieved growth since their last financing
Pressures from a lack of capital availability also trickle down rounds, investors are no longer competing against each other
to earlier stages of the venture ecosystem. Median and in oversubscribed rounds and bidding up the company’s
average step-ups have compressed to the lowest quarterly valuation. This market change, along with increased time
figures since the beginning of the COVID-19 pandemic, and between rounds, contributed to a slower pace of value
the median time between rounds rose to 1.2 years, which is creation in Q1.
roughly two months longer than the 2022 annual figure. These
7 Q1 2023 US VC VALUATIONS REPORT EARLY-STAGE VC VALUATIONS

Sponsored by
Median step-up hits four-quarter slide

Rolling four-quarter median and average early-stage VC valuation step-up
4.5x
4.0x
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
2017 2018 2019 2020 2021 2022 2023*
Median Average
Median early-stage velocity of value creation Median early-stage relative velocity of value
(VVC) adds just $16 million annually creation (RVVC) lowest since 2017
Median early-stage VVC ($M) between rounds Median early-stage RVVC between rounds
$45 160%
$39.0
$40 140% 125.5%
$35 120%
$30
100%
$25
80%
$20 $16.1
60%
$15 41.9%
40%
$10
$5 20%
$0 0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*

8 Q1 2023 US VC VALUATIONS REPORT EARLY-STAGE VC VALUATIONS

Sponsored by
Late-stage VC valuations
Median late-stage deal value has fallen 40% YoY Top-decile valuation down 70% QoQ
Late-stage VC deal value ($M) dispersion Late-stage VC pre-money valuation ($M) dispersion
$100 $800
$700
$80
$600
$60 $500
$400
$40 $300
$200
$20
$100
$0 $0
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2022
2020
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Ongoing economic headwinds have significantly impacted the Consequently, the exit of these investors and the subsequent
late-stage venture market, which has continued its descent capital crunch has substantially impacted valuations: The
from H2 2022. While the total number of late-stage deals median late-stage valuation in Q1 fell to $55.0 million, an
completed in Q1 2023 was slightly higher than Q4 2022, the 8.3% decline from Q4. Additionally, the top-decile late-stage
median deal size fell 25.0% to $6.0 million, which is the lowest valuation in Q1 was $276.4 million—a whopping $623.6 million
figure observed since Q2 2017. The decrease in deal sizing decline from the record high set in Q3 2021.
speaks to the dearth of capital at the late stage; our data
estimates the capital-demand-to-supply ratio at the late stage The current financing environment is no longer willing to
to be 3.24x, which means that for every one dollar of capital uphold inflated valuations, and this affects not only founders
supplied by investors, there is $3.24 of capital sought by late- and employees but also investors that are looking to realize
stage startups. This is especially concerning given that just value between rounds. The median late-stage VVC shrunk
one year ago, there was more capital available than was being to $9.0 million in Q1, which is down from $19.8 million in
demanded, due largely to a healthy population of sizable 2022—falling below $10.0 million for the first time since 2018.
nontraditional investors putting capital into these enterprises. We expect the valuation environment to worsen through
the end of the year for many businesses at the top of the
As the economy has slowed, so has the fervor of these venture lifecycle as they lose the ability to wait out economic
nontraditional investors, which have exited the venture headwinds and inevitably return to a less startup-friendly
market en masse and taken their capital with them. Crossover fundraising market.
investors, for example, participated in just 18.1% of all US VC
deals in Q1, which is the lowest share observed since 2017.
9 Q1 2023 US VC VALUATIONS REPORT LATE-STAGE VC VALUATIONS

Sponsored by
Average step-up below 2.0x for first time since 2018

Median and average late-stage VC valuation step-up by quarter
5.0x
4.5x
4.0x
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Median Average

Late-stage VVC into single digits Lowest RVVC growth rate since 2017
Median late-stage VVC ($M) between rounds Median late-stage RVVC between rounds
$35 70%
$30 60%
47.5%
$25 50%
$19.8
$20 40%
$15 30%
20.0%
$10 $9.0
20%
$5 10%
$0 0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*

10 Q1 2023 US VC VALUATIONS REPORT LATE-STAGE VC VALUATIONS

Sponsored by
A WORD FROM MORGAN STANLEY AT WORK

Exploring 409A valuations in the global
private markets
What is Morgan Stanley at Work? Steve Liu
Executive Director, Co-Head of Valuation Services
Morgan Stanley at Work provides workplace financial benefits
Steve is responsible for leading the
that build financial confidence and foster loyalty—helping
valuation practice and oversees client
companies attract and retain talent. Our end-to-end offering
engagement, strategic partnerships,
spans Equity Solutions, Financial Wellness, and Retirement
and business development activities to
Solutions. Each benefit solution includes a powerful support the Global Private Markets group.
combination of modern technology, insightful support, and Previously, Steve was the valuation practice leader at SVB
dedicated service that provides your employees with the Analytics. Prior to that, Steve worked with Deloitte and KPMG in
knowledge and tools needed to help make the most of their New York and San Francisco, respectively, for more than a decade,
benefits and achieve their life goals. managing both domestic and international clients that ranged
from startups to Fortune 100 companies. Steve has a Master of
Our Global Equity Solutions help your company and employees Business Administration from New York University’s Stern School
make the most of your equity compensation plan so everyone of Business and master’s and bachelor’s degrees in engineering
feels invested in mutual accomplishment. We provide scalable from The Cooper Union for the Advancement of Science and Art.
He has received the designation Accredited Senior Appraiser in
end-to-end solutions that support your organization at any stage
business valuation from the American Society of Appraisers and
of growth.
holds his Series 63 and 79 licenses from the Financial Industry
Regulatory Authority.
How are you supporting private companies in the
current climate?
valuation methodology and remain transaction-ready for a
Maintaining an accurate and audit-ready 409A valuation is future IPO or another exit event.
important not only for complying with IRC 409A valuation
requirements but also for making strategic decisions around During times of uncertainty, what factors should
equity. And as market conditions remain volatile, our team venture-backed companies consider when it comes to
is helping private companies ranging from the early stage 409A valuations?
to pre-IPO stay current with their valuations, manage safe
harbor requirements, and plan for their ongoing equity As tempting as it may be, management may want to avoid
compensation needs. attempting to overengineer maintainable earnings. The
International Valuation Standards Council notes that “[t]he
We’re also working with founders to provide education on the objective [of the valuation] is not to stress test a valuation
implications of rapidly changing private and public market to an extreme case.”1 As much as short-term volatility can
trends and the potential impacts to their company valuations. As impact a company’s valuation, management might consider
part of this, our team provides assistance with thinking through adopting a more holistic perspective that considers the stage
the possible implications of significant changes in company of development of the business, financial fundamentals,
valuations and the accompanying cascading impacts, such as sector-specific market dynamics, and the time horizon to exit.
option repricing. Management may also want to keep in mind that a significant
decrease in a company’s valuation can potentially start a
For startups still considering secondaries, our valuation services conversation around stock option repricing. Because repricing is
team can help plan and quantify the structure and impact to typically a one-time event, this decision needs to make sense for
their 409A valuations. For later-stage companies, we provide both the short term and the long term.
support to help them navigate potential changes in their
1: “Valuation Uncertainty at Times of Market Unrest,” International Valuation Standards Council, April 20, 2020.
11 Q1 2023 US VC VALUATIONS REPORT A WORD FROM MORGAN STANLEY AT WORK

Sponsored by
For companies that are not considering repricing, it can be given the current funding environment. With uncertainty over
important to weigh the pros and cons from the perspective the company’s next funding round or financing event (or where it
of its option holders. Employees may become frustrated or comes from), financial metrics can be more important than ever
feel differently about their equity if it no longer represents an as drivers for a business’s valuation. This contrasts reliance on
upside to them. Furthermore, option holders that must exercise pricing from historical capital raises that are arguably obsolete.
their options while the strike price remains higher than the
current 409A valuation may be doing so at a loss or be forced to Next, the annual cadence of 409A valuations was previously
abandon their shares by never exercising them. in sync with the 12-month safe harbor period and normal
market conditions; however, these are anything but normal
Lastly, management may want to consider that the overall times. Remember, it doesn’t cost anything to have a discussion
message to employees is not lost. A 409A valuation can be a with your 409A valuation provider to revisit your company’s
chance to communicate to employees the value of their equity valuation, especially if you may be contemplating a significant
compensation and remind them why they joined the company option grant, repricing, or secondary/tender offer.
in the first place. This can be important not only for recruiting
talent but also for retaining it. So, as much as a 409A valuation Lastly, for startups that have deferred their private-to-public
is a number at the end of the day, more importantly, it may be an plans, consider that 409A valuations and related activities (such
opportunity to share with employees an important narrative on as secondaries and tender offers) within three years of an IPO
behalf of the company that helps create a sense of ownership, are subject to public disclosure. So, as much as current market
especially during times of market uncertainty. conditions are rife with volatility, it may be prudent to think
ahead and proactively prepare for those events.
What are some trends you are seeing within 409A
valuations?
Disclosures
With a safe harbor of 12 months, 409A valuations are typically Morgan Stanley at Work and Shareworks services are provided by Morgan
what we call a lagging indicator. What that means is that while Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned
subsidiaries of Morgan Stanley.
a company’s past 409A valuation may have been based on a
healthy step-up in pricing from a recent round of capital, the This information was prepared for information purposes only and is not an offer
to buy or sell or a solicitation of any offer to buy or sell any security or other
funding and the market environment may have changed in the
financial instrument or to participate in any trading strategy. Morgan Stanley
past year. At Morgan Stanley at Work, we’ve seen valuations Smith Barney LLC recommends that investors independently evaluate particular
investments, and encourages investors to seek the advice of a Financial Advisor.
recalibrate to new market norms and repricing become a
The appropriateness of a particular investment will depend upon an investor’s
common refrain. However, it should be noted that not every individual circumstances and objectives. Past performance is not necessarily a
guide to future performance.
company is affected by market conditions in the same way.
Despite the market volatility today, there can be notable The views and opinions expressed in this material are those of the speaker at the
exceptions where startups continue to raise capital and maintain time of this writing and do not necessarily represent those of Morgan Stanley
Smith Barney LLC, its affiliates or its other employees. Of course, these views
sound financial KPIs that result in higher valuations. may change without notice in response to changing circumstances and market
conditions. Furthermore, this material may contain forward looking statements
and there can be no guarantees that they will come to pass. The discussion
For companies that completed secondaries or tender offers, of any securities in this material should not be construed as a solicitation
which were accounted for in prior 409A valuations, we’ve seen to buy or sell such securities. Portfolio holdings are subject to change and
there is no guarantee that any securities mentioned will be held in a client’s
pricing recalibration that extends beyond the 409A valuation. account. It should not be assumed that any securities transactions or holdings
For startups that are still considering strategic secondaries discussed were or will prove to be profitable. Historical data shown represents
past performance and does not guarantee comparable future results. The
sales, there can be greater interest in exploring liquidity options information and statistical data contained herein have been obtained from
outside the traditional avenues. sources that are believed to be reliable but in no way are guaranteed by Morgan
Stanley Smith Barney LLC as to accuracy or completeness.
Given the amount of volatility happening in the global Morgan Stanley Smith Barney LLC is not implying an affiliation, sponsorship,
endorsement with/of the third party or that any monitoring is being done
markets, what can private companies do to manage their by Morgan Stanley Smith Barney LLC (“Morgan Stanley”) of any information
ongoing 409A valuation needs? contained within the website. Morgan Stanley is not responsible for the
information contained on the third party website or the use of or inability to use
such site. Nor do we guarantee their accuracy or completeness.
For startups in particular, the mantra today has become “cut
© 2023 Morgan Stanley Smith Barney LLC. Member SIPC.
burn and extend runway.” In other words, the focus has turned
toward cash flow and ensuring the durability of the business CRC 5601887 4/2023
12 Q1 2023 US VC VALUATIONS REPORT A WORD FROM MORGAN STANLEY AT WORK

Sponsored by
Venture-growth valuations
Median deal size nearly 50% lower than Q4 Median pre-money valuation lowest since Q1 2018
Venture-growth deal value ($M) dispersion Venture-growth pre-money valuation ($M) dispersion
$250 $4,000
$3,500
$200
$3,000
$150 $2,500
$2,000
$100 $1,500
$1,000
$50
$500
$0 $0
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
The lack of viable paths to liquidity, the nontraditional investor Accompanying the decline in valuations and step-up
pullback, and the renewed focus on lean, capital-efficient multiples are venture-growth-stage deal sizes, which saw
business models have continued to pressure venture-growth- a Q1 median of $7.0 million, representing a 47.8% decrease
stage startups. In Q1, the median pre-money valuation fell from the Q4 2022 median of $13.4 million. Not only did the
to $90.0 million, representing a 74.6% decline from the 2021 median deal size fall, but the top-decile deal size also fell
full-year record high of $355.0 million. For the first time since below $100.0 million for the first time since Q1 2018. The
Q1 2018, quarterly pre-money valuations have fallen below shrinking deal sizes suggest several contributing factors: the
$100 million. Investor confidence in venture-growth-stage diminished supply of capital historically made available by
investments has been shaken as public and private valuations the participation of nontraditional investors; the interest of
continue to reconcile. Investors are requiring larger equity startup founders to minimize equity dilution by raising smaller
positions to mitigate the increased risks of the current VC amounts of capital at flat or nominally higher valuations; and
environment, thus leading to compressed valuations. This the consideration of venture debt as a complementary source
in turn has dramatically impacted valuation step-ups such of financing to further extend cash runway without large
that Q1’s rolling four-quarter median step-up fell to 1.3x impacts to the cap table. A prime example of this is Good
from its decade-high of 1.8x. The parabolic appearance of Eggs, a fresh grocery delivery company, which reportedly
the rolling four-quarter step-ups from Q2 2020 through Q1 took a 94% valuation haircut to secure $7.0 million in lifeline
2023 coinciding with the VC market’s valuation swell and capital in Q1 2023. While this is an extreme case, we expect
compression suggests that step-up multiples will continue to the frequency of down rounds to pick up among the venture-
fall through the end of the year back to low-growth figures. growth stage through the end of the year.
13 Q1 2023 US VC VALUATIONS REPORT VENTURE-GROWTH VALUATIONS

Sponsored by
Step-ups show little growth for companies

Rolling four-quarter median and average venture-growth valuation step-up
2.5x
2.0x
1.5x
1.0x
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Median Average
Investors requiring larger stakes Lack of liquidity trapping companies

Venture growth share acquired dispersion by quarter Median time (years) from founding for venture-growth
companies
50% 11.2 11.1
11.0
40%
10.8
30%
10.6
20%
10.4 10.3
10%
10.2
0%
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 10.0
2019 2020 2021 2022 2023*

9.8
Top and bottom quartile range
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Top decile Median Bottom decile Average

14 Q1 2023 US VC VALUATIONS REPORT VENTURE-GROWTH VALUATIONS

Sponsored by
Agricultural technology (agtech)

Median venture-growth deal sizes see uplift in Q1 Investors seek larger equity positions in seed-
Median agtech VC deal value ($M) by stage stage startups
Median agtech VC share acquired by stage
$35 35%
29.3%
$30 30% 25.8%
24.4%
23.4% 23.3%
$25 $13.5 25% 21.9%
$7.6
$20 $16.9
$5.2 20%
$15 $4.8
15%
$2.0 $2.0
$10
$1.6 10%
$5
5%
$0
0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Seed Early-stage VC
Late-stage VC Venture growth Seed Early-stage VC Late-stage VC
Note: Low data count for Q1 2023. Note: Low data count for Q1 2023.
Median early-stage valuations surpass late-stage Median seed-stage step-ups on par with prior
Median agtech VC pre-money valuation ($M) by stage five quarters
Rolling four-quarter median and average agtech seed VC valuation
$90 step-up
$80 4.5x
$69.0
$70 4.0x
$60.2
$60
3.5x
$50
3.0x
$40 $45.0
$30.0
$30 2.5x
$20 2.0x
$10.0
$9.7
$10
1.5x
$0
1.0x
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
Seed Early-stage VC Late-stage VC 2017 2018 2019 2020 2021 2022 2023*
Median Average
*As of March 31, 2023 Source: PitchBook • Geography: US
Note: Low data count for Q1 2023. *As of March 31, 2023
15 Q1 2023 US VC VALUATIONS REPORT AGTECH

Sponsored by
Early-stage step-ups continue their descent

Rolling four-quarter median and average agtech early-stage VC valuation step-up
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
2017 2018 2019 2020 2021 2022 2023*

Median Average
Q1 median late-stage step-ups show modest Venture-growth stage step-ups remain above
increase from prior quarter 2021 figures
Rolling four-quarter median and average agtech late-stage VC Rolling four-quarter median and average agtech venture-growth
valuation step-up valuation step-up
3.0x 2.0x
2.5x
2.0x 1.5x
1.5x
1.0x 1.0x
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2018 2019 2020 2021 2022 2023* 2018 2019 2020 2021 2022 2023*
Median Average Median Average
16 Q1 2023 US VC VALUATIONS REPORT AGTECH

Sponsored by
Information security (infosec)

VC mega-deals evaporating as unicorns pursue Seed rounds retain founder-friendly dilution, while
venture debt investors benefit from supporting late-stage companies
Median infosec VC deal value ($M) by stage Median infosec VC share acquired by stage
$140 35%
$120 30% 28.0% 25.4%

23.8%
23.4%
$100
25% 22.2%
$80
20%
$70.0 15.6%
$60
$24.0 15%
$40 $18.8
$11.5
$11.0 $9.7 10%
$3.6
$20 $5.2
5%
$0
0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Seed Early-stage VC
Late-stage VC Venture growth Seed Early-stage VC Late-stage VC
Note: Low data count for Q1 2023. Note: Low data count for Q1 2023.
Early- and late-stage valuations converging given Step-ups remain consistently higher than market
limited support from venture-growth investors medians
Median infosec VC pre-money valuation ($M) by stage Rolling four-quarter median and average infosec seed VC valuation
step-up
$180 3.5x
$160
3.0x
$140
$120
2.5x
$100
$102.5
$80 2.0x
$60 $44.5
$46.0 $40.1
$40 1.5x
$15.5
$20 $12.3
1.0x
$0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2018 2019 2020 2021 2022 2023*

Seed Early-stage VC Late-stage VC Median Average
Note: Low data count for Q1 2023.
17 Q1 2023 US VC VALUATIONS REPORT INFOSEC

Sponsored by
Infosec early-stage valuation step-ups fall below market norms, showing barriers to entry
Rolling four-quarter median and average infosec early-stage VC valuation step-up
5.0x
4.5x
4.0x
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
2017 2018 2019 2020 2021 2022 2023*

Median Average
Infosec late-stage valuation step-ups remain Infosec venture-growth valuation step-ups

resilient remain above market norms during downturn
Rolling four-quarter median and average infosec late-stage VC Rolling four-quarter median and average infosec venture-growth
valuation step-up valuation step-up
3x 2.5x
2.0x
2x
1.5x
1x 1.0x
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2019 2020 2021 2022 2023* 2018 2019 2020 2021 2022 2023*
Median Average Median Average
18 Q1 2023 US VC VALUATIONS REPORT INFOSEC

Sponsored by
Nontraditional investors
Early-stage valuations of deals with NTI Median late-stage valuation of deals with NTI
participation roughly flat falls to $75.5 million
Median early-stage VC pre-money valuation ($M) with Median late-stage VC pre-money valuation ($M) with
nontraditional investor participation nontraditional investor participation
$70 $120
$60.8 $60.0
$60 $92.5
$100
$50
$80 $75.5
$40
$39.0
$60
$30 $26.0 $44.8
$40.0
$40
$20
$10 $20
$0 $0
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Nontraditional investor No nontraditional investor Nontraditional investor No nontraditional investor
Nontraditional investors have continued to pull back from power of nontraditional investors grows, we expect
VC as result of a lack of liquidity. The lone exception to nontraditional investors to demand more equity and cause
this pullback are CVCs, which typically invest earlier in the valuations to slide further.
venture capital lifecycle and are therefore less exposed
to the aforementioned factors, thus leading them to set a Pullback aside, nontraditional investors play a crucial role in
record participation rate on a deal count basis of 26.5% in adding much-needed capital to the US VC ecosystem, thus
Q1 2023. CVCs, often incentivized by strategic investments bolstering deal metrics. The Q1 2023 median seed-stage
over financial returns, have focused on seed- and early-stage deal size with nontraditional investor participation was $4.6
deals, with 60.2% of completed financings occurring at these million; without nontraditional investor participation, it was
stages YTD. just $1.4 million. Similarly, the Q1 median late-stage pre-
money valuation with nontraditional investor participation
Examining the deal metrics associated with the broader was $75.5 million, versus just $44.8 million without. Deal
nontraditional investor group’s participation shows average metrics are larger with nontraditional investor participation
pre-money valuations have declined across all stages, but for several reasons, including the need to participate in larger
most significantly in the late and venture-growth stages, rounds to effectively deploy capital from their balance sheets,
which have more exposure to public market volatility. At the co-investing alongside investors with more experience in
same time, the average amount of equity acquired increased evaluating deals, and leveraging their brand name to attract
across all stages by 2% to 5%. Nontraditional investors, more capital and achieve higher valuation premiums. Startups
especially those participating with financial returns in mind, that receive capital from nontraditional investors will likely be
compensate for increased risks in the market by requiring a able to continue raising deal sizes and justify valuations above
larger equity share and in turn compressing valuations. As the broader market median.
startups become more capital starved and the bargaining
19 Q1 2023 US VC VALUATIONS REPORT NONTRADITIONAL INVESTORS

Sponsored by
Nontraditional investors continue to pull away from VC

VC deal activity with nontraditional investor participation by quarter
$25 200
180
$20 160
140
$15 120
100
$10 80
60
$5 40
20
$0 0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Deal value ($B) Deal count
Median and average early-stage NTI deal values Average late-stage NTI deal value fell 10.5% YoY
surpassed 2021 levels Late-stage VC deal value ($M) dispersion with nontraditional
Early-stage VC deal value ($M) dispersion with nontraditional investor participation
investor participation
$80 $140
$70 $120
$60
$100
$50
$80
$40
$60
$30
$40
$20
$10 $20
$0 $0
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
20 Q1 2023 US VC VALUATIONS REPORT NONTRADITIONAL INVESTORS

Sponsored by
Liquidity
Average public listing just $215 million initial Average acquisition rises, but data counts low
valuation Valuation ($M) at exit via acquisition dispersion
Valuation ($M) at exit via public listing dispersion
$4,500 $600
$4,000
$500
$3,500
$3,000 $400
$2,500
$300
$2,000
$1,500 $200
$1,000
$100
$500
$0 $0
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Notes: “Valuation at exit” for IPO represents pre-money valuation. “Public listing”
indicates that a company exited via an IPO, direct listing, or reverse merger.
Despite a host of high-quality companies queuing up for a outsized exit value and returns for the market. We expect to
public debut, 2 the IPO market remains shut due to elevated see a leap in exit valuation when the public market is ready to
interest rates and low investor confidence. Q1 recorded host tech unicorns, though this remains distant. Anecdotally,
merely 20 public exits, including eight IPOs. The total exit some investors believe the IPO market is unlikely to reopen
count showed modest improvements from previous quarters later this year, and people might have to wait till 2024. With
and is on par with early 2022 levels, driven primarily by M&A a return of investor demand, a large backlog of startups with
activity. Many of these cash-burning, mature startups are solid business models, healthy financials, and sustainable
trapped in a capital availability crunch and will likely have to growth will be able to capitalize on the opportunity to access
risk raising a flat or down round, explore debt options, or, in the public market.
an ideal case, achieve positive cash flow to wait out a hostile
financing environment. Private market valuation declines present an opportunity
for corporations with abundant cash reserves to acquire
The median public listing VC exit valuation jumped to $185.9 startups with a high level of synergies. Not knowing when
million in Q1, up 42.3% from the previous quarter. Despite this the market will hit rock bottom, some founders may look to
substantial quarterly increase, the figure is only a fraction sell their businesses at a discount to return liquidity to cap
of the lofty valuations recorded in 2021 and more closely table shareholders, as well as for peace of mind. Anecdotally,
resembles 2018 levels. Among all public exits completed in M&A activity for privately held companies has ticked up
Q1, half were healthcare deals, and all four of the tech exits in the first two quarters of 2023, albeit through relatively
were reverse mergers. Historically, tech IPOs tend to generate small transactions.
2: As of February 28, 2023, 219 companies are estimated to be in the IPO backlog, as discussed in our Q1 2023 Quantitative Perspectives: Putting the Pieces Back Together.
21 Q1 2023 US VC VALUATIONS REPORT LIQUIDITY

Sponsored by
Few large exits to generate returns

Quarterly median valuation step-up at exit by type
3.0x
2.5x
2.0x
1.5x
1.0x
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2017 2018 2019 2020 2021 2022 2023*

Acquisition Public listing
Note: “Public listing” indicates that a company exited via an IPO, direct listing, or reverse merger.
Median step-up at exit remained relatively unchanged

Rolling four-quarter median step-up at exit by type
2.00x
1.75x
1.50x
1.25x
1.00x
2018 2019 2020 2021 2022 2023*

Acquisition Public listing
Note: “Public listing” indicates that a company exited via an IPO, direct listing, or reverse merger.
22 Q1 2023 US VC VALUATIONS REPORT LIQUIDITY

Sponsored by
Deal terms
Venture market quickly becoming more investor-friendly
VC Dealmaking Indicator by quarter
70
60
50
40
30
20
10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018 2019 2020 2021 2022*

Early-stage VC normalized smoothed index Late-stage VC normalized smoothed index Venture growth normalized smoothed index

*As of December 31, 2022
Our VC Dealmaking Indicator shows that the US venture Deals with cumulative dividends jump to 26.3%
market has strongly favored investors through the first Deals with cumulative dividends as share of all VC deals
quarter of the year. In fact, we estimate that Q1 2023 marks
30%
the most investor-friendly market environment observed in
26.3%
nearly 10 years. Given the current economic environment
and ongoing volatility, more structured equity deals favoring 25%
investors are to be expected. Our data reveals an uptick in the 20.6%
occurrence of downside protections being negotiated in term 20%
sheets, and we anticipate this trend to increase in coming
quarters as investors look to de-risk future investments.
15%
Over the past three quarters, there has been a growing trend
10%
of investors securing cumulative dividends, which guarantees
them accrued dividend payments. This upward trend reflects
heightened investor interest in securing economic benefits 5%
from their investments, even in situations wherein the
outcome may not be optimal. Through Q1, our data shows 0%
that the proportion of cumulative dividends as a share of all
2020
2022
2014
2018
2023*
2016
2019
2021
2017
2015
2013
dividends is 26.3%—the highest percentage we’ve observed

in over a decade. Participating shares have also become
increasingly frequent, indicating a growing demand from *As of March 31, 2023
investors to negotiate additional consideration beyond the
standard liquidation preference payout.
23 Q1 2023 US VC VALUATIONS REPORT DEAL TERMS

Sponsored by
Average dividend increased to three-year high Participating shares increase in proportion

Average dividend Deals with liquidation participation as a share of all VC deals
7.5% 35%
7.4% 30%
7.3% 25%
7.2% 20%
7.11%
7.1% 15%
7.02%
7.0% 10% 9.0% 9.5%
6.9% 5%
6.8% 0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
The proportion of flat and down rounds as a share of all raising equity capital at a stagnant or reduced valuation are
rounds completed grew for the fourth consecutive quarter, choosing to delay their return to market in hopes that the
representing 7.5% of all rounds in Q1 2023, which is roughly valuation environment will become more hospitable. Given
5.7% higher than Q1 2022. While elevated, this is likely the that many of these businesses will not be able to wait out the
calm before the storm as many startups that face the risk of market, we expect the percentage of flat and down rounds to
increase substantially in the coming quarters.
Down rounds start to climb

Share of VC deals by up, flat, or down rounds by quarter
100% Down
90% Flat
80% Up
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020 2021 2022 2023*

24 Q1 2023 US VC VALUATIONS REPORT DEAL TERMS

Additional research
Private markets
Q1 2023 PitchBook-NVCA Q2 2023 Analyst Note:

Venture Monitor The Decline of Unicorn
Acquisitions in a Conservative
Download the report here M&A Market
Download the report here
Q1 2023 Analyst Note: M&A Q1 2023 Analyst Note:

and CVC in an Economic Gaining an Edge in VC
Downturn Investment Selection
Download the report here Download the report here
More research available at pitchbook.com/news/reports
COPYRIGHT © 2023 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced
in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping,
and information storage and retrieval systems—without the express written permission of PitchBook Data, Inc.
Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be
guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any
security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain
all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in
substitution for the exercise of independent judgment.

Q1 2023 US VC Valuations Report

Uploaded by

Copyright:

Available Formats

You might also like

Q1 2023 US VC Valuations Report

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Q1 2023 US VC Valuations Report

Uploaded by

Copyright:

Available Formats

Q1

Institutional Research Group

Deals by sector: infosec 17 Max Navas

Liquidity 21 Vincent Harrison

Published on May 10, 2023

Click here for PitchBook’s report methodologies.

2 Q1 2023 US VC VALUATIONS REPORT

Experienced 409A Valuation Professionals.

With more than 60 years of combined

Get started today

4 Q1 2023 US VC VALUATIONS REPORT KEY TAKEAWAYS

Angel and seed

writing checks only to companies with strong fundamentals,

1.86x in Q1, attesting to how those carefully selected companies

5 Q1 2023 US VC VALUATIONS REPORT ANGEL AND SEED

Seed share acquired highest since Q1 2018

2017 2018 2019 2020 2021 2022 2023*

Median age of company at seed round hits three years

6 Q1 2023 US VC VALUATIONS REPORT ANGEL AND SEED

7 Q1 2023 US VC VALUATIONS REPORT EARLY-STAGE VC VALUATIONS

Median step-up hits four-quarter slide

2017 2018 2019 2020 2021 2022 2023*

Source: PitchBook • Geography: US Source: PitchBook • Geography: US

8 Q1 2023 US VC VALUATIONS REPORT EARLY-STAGE VC VALUATIONS

9 Q1 2023 US VC VALUATIONS REPORT LATE-STAGE VC VALUATIONS

Average step-up below 2.0x for first time since 2018

Source: PitchBook • Geography: US

Source: PitchBook • Geography: US Source: PitchBook • Geography: US

10 Q1 2023 US VC VALUATIONS REPORT LATE-STAGE VC VALUATIONS

A WORD FROM MORGAN STANLEY AT WORK

11 Q1 2023 US VC VALUATIONS REPORT A WORD FROM MORGAN STANLEY AT WORK

12 Q1 2023 US VC VALUATIONS REPORT A WORD FROM MORGAN STANLEY AT WORK

13 Q1 2023 US VC VALUATIONS REPORT VENTURE-GROWTH VALUATIONS

Step-ups show little growth for companies

Investors requiring larger stakes Lack of liquidity trapping companies

50% 11.2 11.1

2019 2020 2021 2022 2023*

Top decile Median Bottom decile Average

Source: PitchBook • Geography: US Source: PitchBook • Geography: US

14 Q1 2023 US VC VALUATIONS REPORT VENTURE-GROWTH VALUATIONS

Agricultural technology (agtech)

15 Q1 2023 US VC VALUATIONS REPORT AGTECH

Early-stage step-ups continue their descent

2017 2018 2019 2020 2021 2022 2023*

16 Q1 2023 US VC VALUATIONS REPORT AGTECH

Information security (infosec)

$120 30% 28.0% 25.4%

2018 2019 2020 2021 2022 2023*

17 Q1 2023 US VC VALUATIONS REPORT INFOSEC

2017 2018 2019 2020 2021 2022 2023*

Infosec late-stage valuation step-ups remain Infosec venture-growth valuation step-ups

18 Q1 2023 US VC VALUATIONS REPORT INFOSEC

19 Q1 2023 US VC VALUATIONS REPORT NONTRADITIONAL INVESTORS

Nontraditional investors continue to pull away from VC

20 Q1 2023 US VC VALUATIONS REPORT NONTRADITIONAL INVESTORS

21 Q1 2023 US VC VALUATIONS REPORT LIQUIDITY

Few large exits to generate returns