[ad_1]
For the previous yr, everybody’s been predicting that the muted exit setting and bone-dry funding market would deliver a reckoning for a lot of late-stage firms.
We’ve been seeing layoffs and cost-cutting measures throughout the board as firms look to shore up their steadiness sheets. And now, an growing variety of firms are elevating cash at decrease valuations than their final funding. Sadly for startups, it appears these down rounds are right here to remain.
Earlier this week, Alex Wilhelm dove into new Q1 knowledge from Carta, which confirmed that the variety of down rounds had practically quadrupled in Q1 2023 in comparison with the identical time final yr.
Down rounds carry a unfavorable connotation and are sometimes interpreted because the fault of the corporate or founder. However in a market the place the whole lot appears to be heading downward, they shouldn’t suggest an organization or its founders made a mistake — you typically merely can’t assist it. To VCs’ credit score, many buyers have been vocal over the past yr about how firms shouldn’t give in to this stigma.
“Once you set a $700 million valuation, it appears such as you’re profitable someway and also you’re not being diluted, however really, you simply raised the bar so excessive.” Russ Wilcox, companion, Pillar VC
This market cycle hasn’t seen an organization elevate a down spherical forward of a profitable exit but, however startups considering that chance ought to take coronary heart as a result of firms have overcome this hurdle previously. Meta, referred to as Fb on the time, might be the best-known instance. The social media firm had raised a down spherical in 2009 earlier than it went public in 2012 at a $104 billion valuation.
But it surely is perhaps onerous for a B2B gross sales startup to achieve confidence from Meta’s story — the social media firm has all the time appeared to function in its personal world. However there’s one firm’s story that is perhaps simpler to narrate to: E Ink.
For these unfamiliar, E Ink was based in an MIT lab in 1997 and is the corporate that invented digital paper, the tech broadly used for shows in e-book readers just like the Kindle, digital signage, smartwatches and digital labels.
[ad_2]