Public market declines will allow VCs to invest at more appealing prices

Commodity shocks have resulted in high energy prices globally, and all eyes look to see the Fed’s response as time goes on. US public market declines starting in September 2021 have reached a nadir for the moment, and investors are considering their next steps.

In our latest Quantitative Perspectives report, we review how public market declines have reduced VC valuations.

We see ample opportunity for managers to deploy capital at attractive entry multiples. There is significant capital available to startups—even as the estimated demand for capital increases at both the early and late stages—and public market performance has begun to stabilize and even improve.

Here are some key takeaways from the research:

• Public companies that were previously VC-backed have had their price-to-sales multiples uniformly sliced, with the median ratio falling from 17.3x to 5.6x over the last year.





• Late-stage demand for capital has increased YoY at twice the rate of the early stage. This translates to more opportunities for investors to negotiate with startups at that stage, especially as the ratio of capital demanded to supply of capital shifts in favor of the investor.





• Despite exit market headwinds, VC dealmaking has swung in favor of investors since peaking in founder friendliness in Q1 of this year, according to our VC Dealmaking Indicator. Lower valuations and increased capital demand have been the most investor-friendly conditions over that period.

For more data and analysis, click to download the full 33-page report: Silver Linings on the Time Horizon.

Feel free to reach out with any questions or feedback, or if you would like to discuss the research.