TLDR:
– Venture-backed startups are raising smaller follow-on rounds
– Despite smaller rounds, investors still believe in the business
Venture-backed startups are experiencing a trend of raising smaller follow-on rounds, contrary to the traditional expectation of rounds increasing in size. A review of Crunchbase data reveals that companies that last raised funds in a previous bubblier investment climate are now securing fresh capital in smaller amounts. For example, some American companies that raised Series E or Series F rounds this year reported rounds that were smaller than their prior rounds. Some companies saw significant decreases in funding, while others raised larger amounts. Despite the decrease in round sizes, raising a smaller round is not necessarily a negative indicator in the current investment climate, as it still shows investor confidence in the business and its potential for returns. However, the decrease in average round sizes and valuations indicate a considerable shift since the market peak.
