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Ever since As the technology downturn begins to affect startups, one question persists: What if we’re looking at a correction?
The question suggests that the way deals have been executed over the past two years, mostly in late 2020 and almost all of 2021, are the exception, not the rule, and investment spending is returning to normal. But what exactly does it mean?
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Well, the frenetic trading environment of 2021, which saw generous valuations, was not ideal for anyone to hope to return to. In retrospect, investors and observers began to accept that a market that neglected due diligence was unhealthy.
Prices are a very difficult topic. VCs love a good deal, but they also don’t want to lose money on past investments. Still, it’s slowly becoming clear that the expectations of many startups have gotten out of hand for a while. If the cross-funding is largely out of the picture, maybe we can just wash our collective hooves together and pretend 2021 never happened.
The problem, though, is that the venture capital market simply isn’t returning to 2020 levels, at least not in all respects. Today, we’re delving into CB Insights’ report on Q1 2023 trends, which shows that the share of mega rounds and late-stage deals is at its lowest level in years.
A few late deals are cause for concern.
And that is an understatement. It had the lowest number of venture rounds (7,024) since the previous quarter. Second quarter of 2020In addition to seeing a 12% decline from Q4 2022, according to CB Insights.
This fact alone may indicate that we are in a market that will adjust towards 2020 levels, but breaking down the data paints a more worrying picture.
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