The value of a later stage startups is declining, data shows.
This particular market move is no surprise, but the magnitude of the contraction is worth noting. Forge Global, a secondary market for private company shares, “said that company prices on its platform were down 19.9 percent in February and March compared to the fourth quarter of last year,” the Financial Times reported.
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Other data confirms the general price movement for unicorns at a late stage – it is trending down and to the right.
Secondary data should be viewed as a guide to determine market sentiment, not to determine the public market prices of companies. Recall that Coinbase was valued at more than $100 billion in secondary markets before being directly listed last year. According to data from Yahoo Finance, the company is worth about $38.6 billion today, a steep discount from the lofty 12 figures it once had.
That caveat aside, a one-fifth drop is material and provides more evidence that what Instacart went through earlier this year could be more of a harbinger of things to come than a one-time data point.
How big is a 20% haircut?
In March, Marketingwithanoy looked at data from Carta, which helps startups with cap table management and other legal matters related to ownership. The company has a wealth of data from startups actively raising money, giving it a fascinating insight into retail investor sentiment. The data showed shrinking round sizes and valuations for Series C startups.
In numerical terms, the average deal size at the Series C mark in January and February 2022 was 23% lower than in the last two months of 2021, and valuations fell by an average of 47%. (We will receive updated data from Carta this week if possible to provide a clearer picture of Q1.)