February 16, 2024

Venture Capital: Annual VC Valuations Report

PitchBook recently published its 2023 Venture Capital Valuations Report, and not surprisingly, the news is pretty grim. VC valuations continued to head south from their 2021-22 levels. Not surprisingly, exit prospects weren’t great either. IPOs were practical non-existent and the valuations for deals that did get done were pretty dismal, but this excerpt says there’s one bright spot – while M&A activity was down, valuations actually increased over the prior year:

The median exit valuation for startups making their public debut in 2023 declined $117.0 million YoY to $110.6 million, the lowest in over a decade, despite the strong performance of public markets during the year. Alternatively, acquisitions emerged as a seemingly more viable route for liquidity given the more resilient valuations attached to many M&A transactions. The median acquisition valuation in 2023 reached $61.4 million, a 25.1% increase from 2022. Despite this bright spot, the median M&A step-up in 2023 was just 1.33x, the lowest since 2016, suggesting that value creation upon acquisition still lagged prior years.

Although the report notes that people are optimistic that an improved interest rate environment may help create a more favorable deal environment, economic & geopolitical uncertainties may keep a lid on things for at least the first half of the year.

John Jenkins