Startup Valuation Trends for 2023: What Technology Entrepreneurs Need to Know
Some of the world’s greatest and most valuable companies were launched during recessions or weak economic settings. Examples include Microsoft and Apple (launched in 1975 and 1976, respectively), and IBM (debuted in 1911).
Fast forward to present day, and thousands of talented entrepreneurs are building new, disruptive technology businesses — despite lingering fears that we could all face a recession in 2023.
My point: You can build a technology business that overcomes economic headwinds. My former business partner (Amy Katz) and I did exactly that with a business launch in 2008 — during the financial crisis on Wall Street. We largely ignored the crisis, bootstrapped our operations, closely managed our clash flow, built deep relationships with sponsors and readers, and had a successful exit in 2011 (far earlier than we expected).
Fast forward to present day, and I remain upbeat about entrepreneurial activity. Still, your startup journey may involve eating a bit of near-term humble pie. The reason: If you raised money during the sky-high valuation years of 2020 or 2021, you may have to settle for a lower valuation for funding in 2023.
The evidence: The technology industry lost $7.4 trillion in market valuation from November 2021 to November 2022, according to CNBC. Amid rising interest rates and falling stocks on Wall Street, many investors shifted their focus from rapid revenue growth to a proven path to profitability.
Potential Evidence of Down Round Funding Deals
But what does all that mean for technology entrepreneurs and angel investors? Consider these findings from AngelList Venture and Silicon Valley Bank. For Q3 of 2022:
Pre-seed valuations declined by 19.4% to $10.2 million;
Seed-stage valuations declined by 15.9% to $28 million;
Series A valuations declined by 13.1% to $88.6 million; and
Series B valuations declined by 28% to $301 million.
Admittedly, those averages can be skewed by outlier deals, AngelList Venture and Silicon Valley Bank note. And we’ve certainly seen startups increase their valuations in recent months — particularly if they became cashflow positive coupled, strong ARR (annual recurring revenue) growth or a well-managed monthly burn rate.
Early Stage Funding: Channel Angels Remains Responsibly Active
If you’re seeking funding right now, consider these additional variables:
Venture capital investments and exits plummeted in 2022, according to Pitchbook and the National Venture Capital Association (NVCA).
North American startup funding fell 63% in Q4 of 2022 compared to Q4 of 2021, according to Crunchbase.
in stark contrast, Channel Angels continued to invest steadily — and responsibly — throughout 2022. In fact, it was our most active year to date. Some of our seed and early stage funding deals involved Brelyon, Chattr, Evo Security, Flexbase, Lumu Technology, nOps, Ockam, Rewst, SaaS Alerts, Ternary and Ybot.
How to Apply for Potential Funding
We expect to remain responsibly active in 2023. If you’d like to apply for potential funding from us, we’ll typically reply with some initial thoughts within two business days of your inquiry. But before you send us your inquiry, please check out this FAQ to see if we’re a potential funding fit for your business.
If we’re not a potential fit for your funding needs, then seek out local or specialized investors by visiting the Angel Capital Association for more leads and contacts.
Still got questions about valuations, funding and deal flow? Feel free to email me: Joe@ChannelAngels.com. Thanks in advance your your inquiries.