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What the numbers say: Per CBInsights, the median period between funding rounds has increased due to the macroeconomic headwinds. Startups are now taking 26 months between Series C and D stage rounds, nine months more than the previous period of 15 months. The extended fundraising period can be attributed to the VC funding retrenchment, due to which investors are taking longer to conduct thorough due diligence for potential opportunities. What happened: Several startups that raised equity funding recently had to take valuation cuts. At the end of Q4 2022, median valuations of Series C rounds dropped 15% QoQ to $339.3M. Due to lengthened median periods between funding rounds and the possibility of having to raise a down round with a valuation cut, startups were instead raising venture debt — typically raising between 20% to 35% of their latest equity round. Where to see the impact: Taking venture debt rather than equity funding helped several startups avoid layoffs and business failure. However, the situation was further aggravated by the collapse of startup venture debt provider Silicon Valley Bank in March earlier this year. CBInsights predicts this will result in a further slump in startup valuations, increase startup mortality, and intensify layoffs, especially in startups with high cash burn. |
