Increasing Seed Valuations Exacerbate 'Series A Crunch'
October 16, 2013
The median pre-money valuation for all companies at the seed stage has doubled over the last four years from $2.6 million in 2009 to $5.2 million through the first three quarters of 2013. PitchBook data show that Series A valuations are also increasing, but at a slower rate—from $6.6 million in 2009 to $8.9 million through the first three quarters of 2013. High seed-stage valuations are likely having a major effect on startups’ ability to raise a subsequent Series A round, as investors at the seed stage want to see appreciation in their investment but Series A investors often believe that the valuation at the seed round was unduly inflated.
And, as mentioned in previous PitchBook reports, the number of seed rounds has grown over the last three years, which has resulted in early stage and later stage financings shrinking as a percentage of the overall VC pie. All of this points to a more difficult financing environment for companies raising a Series A round and for VC investors hoping to pick out seed-stage companies with solid growth prospects but at a reasonable valuation.