According to recent statistics, the venture capital sector is slowing down from its strong pace of 2021. According to data collected by Carta, a unicorn business that offers private companies with equity management and other services, round sizes from the Series A through C stages are shrinking in the United States, as are valuations tied to those agreements. The pricing reprieve may be great news to investors looking for a bargain. The news may not be good for founders looking for their next round of funding.
We’re just a few weeks away from the end of the first quarter of 2022, which means we’ll soon be inundated with statistics on the success of the domestic and global venture capital markets at the start of the year. However, while aggregated data is valuable for tracing bigger and slower-moving patterns in the startup market, we’re more concerned about short-term movements this morning. This is for investors who want to put money to work right away and company entrepreneurs who want to close a fresh round quickly.
Today, we’re simply talking about the US market, because Carta has the most data and hence the best viewpoint. However, as the year proceeds, we’ll continue to look for similar statistics from the firm and its competitors. Now it’s time to get down to business. In the United States, how are the Series A, B, and C rounds changing?
Let’s start with the amount of money raised per round. There isn’t much complexity in this data. Here’s what Via Carta’s Head of Insights Peter Walker has to say: It’s worth noting that we’re comparing the last two months of 2021 with the first two months of 2022, rather than entire quarters. Also, Walker clarified in a conversation with TechCrunch that the above data is based on closure dates rather than announcement dates, so we aren’t mixing rounds from various eras, which would contaminate the dataset.
Between November and December 2021 and January and February 2022, the average round size in the United States shrank the most. This suggests that outlier Series a rounds are becoming less common in terms of size. The fact that the median Series a round fell as well is likely due to identical causes, even if it may imply a less severe drop than the averaged data suggest. Despite this, Series A rounds in the first months of 2022 are still exceeding $10 million on a median and average basis. Whether there is a slowdown or not, the market is still hot.
The average reduction in Series B round data is greater than the median round-size change. The Series B market is shifting, but not as much as the Series A market, as seen by an even lower median reduction than we witnessed with Series a rounds. The Series C data is more severe, with round sizes decreasing more rapidly in median terms than the average, suggesting that outlier transactions at the venture stage are shifting, but that smaller deals are witnessing greater movement than Series A and B rounds.
