The pandemic-era highs are long gone, and for many startups that means finally coming to grips with a cut to their valuation.
Flat and down rounds for VC-backed companies hit a decade-high in the first half of 2024, comprising 28.4% of all deals, according to PitchBook’s Q2 2024 US VC Valuations Report.
The rate of down rounds for startups jumped from 7% in 2022 to 14% in 2023 after the market reset, and flat rounds followed a similar trajectory, from around 4% of deals in 2022 to nearly 10% in 2023. Those rates have only climbed in the first half of 2024.
Investors have been favoring leaner startups with clear paths to profits over companies still in growth-at-all-costs mode. Many of the startups that last raised during the venture bull market aggressively cut costs to get to cash-flow break-even or profitability.
By 2023, insider and bridge rounds had become the new normal as founders tried to wait out the bear market. But with little sign of the exit market easing and investors’ cash tied up or diverted to AI investments, more founders are finally coming to terms with current, depressed valuations.
The most high-flying of those companies have since managed to grow into their pandemic valuations. Expense management software startup Ramp, for example, took a roughly 30% valuation haircut in 2023 co-led by Thrive Capital and Sands Capital, but rebounded in April to a $7.65 billion valuation led by Khosla Ventures and Founders Fund.
Others haven’t fared as well. Andreessen Horowitz-backed satellite company Astranis raised a $200 million Series D in July at a $900 million post-money valuation, according to a PitchBook estimate—a 44% discount from its previous round, closed about one year earlier.
Cybersecurity startup OneTrust also took a down round last year: Its $150 million Series D, led by Generation Investment Management in 2023, came at a 12% drop from its previous valuation set by TCV in its 2020 Series C.
Still, if the last major bear market is anything to go by, startup valuations have the potential to fall even further. Down rounds comprised some 36% of all VC deals in the aftermath of the 2008 financial crisis, according to PitchBook data.
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