As expected, 2023 was a difficult year for startup investing. Investors had to stomach many startups shutdowns but pre-seed and seed valuations were still too expensive. In 2023, the number of IPOs went down to below the 2020 level but investors and LPs really need the exits to have more capital to invest back into startups. As we approached the end of the year, I observed improvement in deal quality and pricing compared to early 2023. Startups who raised in 2021 and early 2022 are running out of money. Companies who didn’t achieve product-market fit mostly wound down with investors’ understanding. But many companies who made good progress are having trouble fundraising. The best case scenario for them is to raise a new round with flat valuation. The next best case scenario is to accept a down round with existing investors’ consent. They could also recapitalize or shut down the company but that’s obviously not desirable. It’s a very tough fundraising environment out there. At the same time, I start to see great bargains emerge for investors who have capital and conviction. In 2024, I look forward to investing in startups who started before or during the pandemic, have achieved PMF but need capital to get to profitability. These deals are going to get priced at very reasonable valuations and founders are going to stretch every penny they have to get to default alive. I post all my startup investments on my
still seems like early-stage is overpriced relative to progress -- later-stage (C/D) valuations have pulled back a lot (50%) and some reductions at A/B, but not sure we have seen similar price rationality at seed (yet)... maybe that starts happening in 2024.
I started to see big price reduction in seed/series A extensions for companies who only have a few months of runway but have good traction. I believe a lot more companies will be in similar situations in 2024 but investors can't fund every good deal. What ends up getting funded will have amazing valuations and quality. ;-)
still seems like early-stage is overpriced relative to progress -- later-stage (C/D) valuations have pulled back a lot (50%) and some reductions at A/B, but not sure we have seen similar price rationality at seed (yet)... maybe that starts happening in 2024.
I started to see big price reduction in seed/series A extensions for companies who only have a few months of runway but have good traction. I believe a lot more companies will be in similar situations in 2024 but investors can't fund every good deal. What ends up getting funded will have amazing valuations and quality. ;-)