We are in the worst venture market in ten years, according to a new report from AngelList and Brex. Despite a strong NASDAQ, it’s harder to raise a round, get a markup, or reach an exit than at any point since 2013.
From the report:
Dating back to 2013, 2Q23 was the slowest quarter ever observed in our dataset in terms of startup dealmaking, with only 5.25% raising a round or exiting. This rate of dealmaking exceeds the previous low of 6.1% set last quarter (1Q23), making the first half of 2023 one of the worst fundraising environments we’ve observed for startups.
AngelList has a great dataset of a huge number of venture deals.
I’m on there myself several days a week, scouting for prospects. So this report offers a grim, but accurate, picture of the market.
What I’m Seeing in the Market
I’m doing fewer deals myself these days. I’m not happy about that — I’d like to be doing more!
But there is a lot less to choose from right now. And if only a small fraction of deals meet your criteria, things become even more difficult when there are fewer deals to choose from.
I think a lot of angels have pulled back or exited the market entirely.
Earlier this year, I was in an SPV* for an awesome AI company. I was worried I wouldn’t get the full allocation I wanted!
Turns out I had no reason to fret. I got every penny I asked for, and the deal didn’t even come close to filling up.
If an AI company with rapid growth and a killer product struggles to raise, I can’t imagine what it’s like for the average startup.
Good Deals Are Still Getting Done
But before you go into a corner and cry, here are some good things I’m seeing in the market.
Great startups are still getting funded. The round might take 6 months and the valuation will probably have you muttering profanity under your breath — but sooner or later, the deal gets done.
If you’ve got a great company and you want to raise money, go for it! But don’t be surprised if it’s really, really hard.
If you’re an investor, now is the time to be in the market. You can walk into almost any deal you want, and you’ll be paying prices so low you’ll think 2021 was just a bad dream.
When Does This End?
So, when does the market recover?
AngelList is predicting early 2024. I think that’s too optimistic.
I’m not predicting a recovery until late 2024 or even early 2025.
A lot of LP’s are tapped out and raising a venture fund is hard. Many angels have run away terrified, never to return.
But in the end, we can’t know where the market is headed and it doesn’t matter.
I play the game on the field, whatever it is. Good market or bad, I want to find the best companies and back them.
But I won’t mind if these valuations last just a little longer!
What are you seeing in today’s venture market? Leave a comment and let us know!
Have a great weekend everybody!
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*SPV: Special Purpose Vehicle. This is an LLC that holds the money of a bunch of investors in an investment group, or “syndicate.” That money goes into a startup as one line on its cap table, keeping the cap table (or list of owners) clean. This is how syndicates make investments.
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