Late-stage startups accrued value at a slower rate in 2023 than any year since 2016, as VCs hit the reset button on valuations and pulled back from new late-stage deals, according to PitchBook’s latest US VC Valuations Report.
Late-stage startup valuations grew by a median of $6.6 million between funding rounds in 2023, down 61.6% year-over-year. For venture growth, value creation was even slower: Valuations grew by a median of $2.4 million between rounds.
The relative velocity of value creation, or the annual percentage change in valuation between rounds, fell from 44.8% to 14.5% for late-stage startups and from 35.1% to a mere 2% for venture growth-stage companies last year.
After 2021’s bull run in venture, VCs have tempered valuations, especially for late- and growth-stage companies. The relative velocity of value creation for seed- and early-stage companies, however, was much higher in 2023—at more than 30%—suggesting better potential returns at the earlier stages.
Founders are taking more extreme measures to extend their cash runways, often to avoid the prospect of a flat or down round or a fire sale, through methods like cost cuts and layoffs. The median duration between rounds for late-stage companies stretched to 1.76 years, the longest span in at least a decade.
For those that can’t wait, term sheets with valuation markdowns and additional structure are becoming more common. Around 44% of priced rounds for venture growth-stage companies in 2023 were flat or down rounds, according to PitchBook data.
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