PitchBook News - VC data after a down round

Allegorically speaking, down rounds could be the final nail for a company.

That, of course, can't be the full truth.

Sure, some companies aren't able to continue growing after raising down rounds, but our data shows that 70% of companies that raise a down round go on to raise more private investment.

The expectation is that down rounds are occurring at a much higher rate in 2022 than last year because of the quick departure of the market from growth at all costs—which led to huge valuation multiples—to sustainable growth and strong fundamentals.

Even with the slowing market through the first half of 2022, only about 6% of round valuations were lower than the company's prior valuation.

Though down rounds are a lagging datapoint.

While it may take time to see these deals pick up in the data, we can look to see how companies that raised down rounds in the past have fared.

It seems that expectations need to be adjusted, but down rounds create a new set of opportunities for both the company and investors.

If I were at a PE firm, I'd be prepping due diligence on the late-stage venture market.

Download our free research: Down Rounds, Impacts, and Exit Opportunities.

As always, please reach out with any questions or feedback.