VC valuations defy downturn. For now
European venture capital pre-money valuations remained resilient in the first half of this year.
In spite of dire outlooks and uncertainty across financial markets, Pitchbook said in a new report today that VC dealmaking was healthy in H1 2022 and valuations have landed higher than expected.
However, dealmaking may flatten and lofty private market valuations could cool, analysts at the data company warned.
“It is too early to tell how VC-backed companies will fare given the declines in public equities, but layoffs, down rounds, and valuation haircuts could increase in frequency in the coming months,” they noted.
In the first half of the year, valuations across all financing stages paced above the figures in 2021, as investors and companies continued to close rounds — despite a slump in valuations of publicly listed companies, particularly in the tech industry.
At the angel and seed pre-money level, which are the furthest removed from public markets and therefore often the most insulated from near-term market volatility, valuations reached €4m and €5.8m, respectively, both figures above 2021 amounts.
The median early-stage valuation was €8.4m — 34.1% higher than in 2021.
At the late-stage level, median valuations in the first half of this year hit €18.7m, and the median deal size reached €6.6m, 36.2% higher than in 2021.
Even with reported layoffs and weaker revenue growth at mature businesses, overall valuations have stayed in good shape, Pitchbook said.
There could be early signs of cooling in the VC ecosystem within healthcare, where Q2 median late-stage pre-money valuations were 5.1% down on 2021.
Software VC valuations and deal sizes set a strong pace in H1 2022 in spite of the challenges facing tech stocks.
The median late-stage software pre-money valuation was €28.4m in H1 2022, up from €21m in 2021.
Pitchbook added: “VC valuations are tied to periodic funding rounds, whereas public equities are subject to daily price swings based on market conditions. Therefore, we expect VC valuations to display a softer decline in multiples immediately; however, when essential funding rounds are closed, the full effects of recalibrated valuations, businesses struggling for growth, and shifting market sentiment will be reflected.”
To contact the author of this story with feedback or news, email Sebastian McCarthy
Credit: Source link
Comments are closed.