PitchBook News - Valuations are worse than they look

Expanding deal counts and increasing valuations seem indicative of a venture rebound.

However, a deeper dive reveals that valuation datapoints remain elevated by two main factors: outsized AI deals and delayed fundraising for companies that last raised during pandemic highs.

AI's growth rate far surpasses the rest of venture. Early-stage AI startups are seeing their valuations grow at an annualized rate of 115%, leaving the overall early-stage rate of 36% in the dust.

The high costs of compute power and zealous interest from investors have created an exceptionally strong market for AI deals, causing valuations to outshine other sectors.

High valuations from the ZIRP era have lingered, inflating today's data on startup values. The runway extensions and layoffs of 2022 and 2023 extended the time between rounds to the highest point in a decade, but with the market remaining sluggish, companies are finally being forced back into raising.

 

Sharp increase in down rounds since initial rate hike.