Lower Valuations

​(this post is from Dec 2022. Though the VC world is dynamic, the broad strokes mentioned below are still relevant)

​I moderated the 'Lower Valuations' roundtable yesterday with a diverse group of investors and ecosystem players. The discussion was part of a larger event, 'Venture Trends,' that VC Lab organized.

Following is a brief high-level summary of thoughts from different participants-

(1) In 2022, valuations have taken a hit globally. While a general downward trend in 2022 is now a given, specific geographies experienced a much higher impact than others. 

(2) Later-stage startups have suffered more and have found it challenging to justify their valuation frothiness. The seed stage (& pre-seed) fared better than other stages to hold up a broader valuation compression.

(3) Macroeconomic impact: While topics like interest rates and inflation keep rattling the public markets, these aspects don't rank among the top factors that impact private market valuations.

(4) Level of compression: Many consented to notice 20%+ compression in valuations in their respective markets. However, compared to some Tech-focused public equities (that witnessed a drop of 60%+ in 2022), there could still be a rationale for further correction in startup valuations.

(5) Time to invest: There was a general sense of eagerness among investors that ones with dry-powder could now find deals priced favorably. 'It's time to invest' - as one participant mentioned.

(6) Sectors: While FinTech, Web3 areas have taken a bigger hit in valuations, others have maintained their position relatively well. Many agreed on AgriTech, FoodTech, and AI as areas of growth and focus.

(7) Looking forward: Startups that have been diligent, disciplined, and built-a-runway have a higher chance of pushing themselves forward. In parallel, competition for such 'creamier' deals will likely keep them attractive for VC capital, hence seeing lesser valuation compression.