2023 Annual US VC Valuations Report

2023
ANNUAL
US
VC Valuations
Report
Sponsored by
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Contents
Key takeaways 4
PitchBook Data, Inc.
Pre-seed and seed valuations 5
John Gabbert Founder, CEO
Early-stage VC valuations 7 Nizar Tarhuni Vice President, Institutional Research and Editorial
Dylan Cox, CFA Head of Private Markets Research

Late-stage VC valuations 10
Venture-growth valuations 12 Institutional Research Group
A word from Morgan Stanley At Work 14 Analysis
AI 16 Kyle Stanford, CAIA

Lead Analyst, Venture Capital
[email protected]
Biopharma 18
A word from Mintz 20 Vincent Harrison

Senior Analyst, Venture Capital
[email protected]
Nontraditional investors 22
Data
Liquidity 24
Collin Anderson
Data Analyst
Deal terms 26
[email protected]
Publishing
Report designed by Julia Midkiff
Published on February 7, 2024
Click here for PitchBook’s report methodologies.
3 2023 ANNUAL US VC VALUATIONS REPORT

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Key takeaways
Though the venture market was in a state of declines over Startups continued to struggle finding exit avenues at or
the past couple of years, much of the pricing pressure has near the premiums observed just two years ago, with public
not yet forced pre-seed or seed-stage valuations below listings, in particular, experiencing a continued downward
the highs of 2021. While it’s true this area of the market is spiral. The median exit valuation for startups making their
relatively insulated from macro pressures that have pushed public debut in 2023 declined $117.0 million YoY to $110.6
late-stage valuations down, and set off public market million, the lowest in over a decade, despite the strong
volatility, that isn’t the full story. The past few years have performance of public markets during the year. Alternatively,
been abundant for small funds (under $50 million), which acquisitions emerged as a seemingly more viable route for
have made up more than 50% of the fundraising counts. In liquidity given the more resilient valuations attached to many
aggregate, these funds have kept competition relatively high. M&A transactions. The median acquisition valuation in 2023
Alongside that, stakes acquired in these deals increased in reached $61.4 million, a 25.1% increase from 2022. Despite
2023, compensating investors for the high risks of the stage. this bright spot, the median M&A step-up in 2023 was just
Along the same lines, early-stage valuations have seen little 1.33x, the lowest since 2016, suggesting that value creation
volatility over the past six quarters, but the stakes acquired upon acquisition still lagged prior years. While expectations
have increased from the lows of a couple of years ago. for lower interest rates may help to create a more favorable
environment for both IPOs and M&A transactions in 2024,
In 2023, the late stages of the venture ecosystem grappled economic and geopolitical uncertainties will likely bring about
with challenges as valuation multiples and capital supply a more cautious approach in the first half of the year.
dwindled, putting increased pressure on dealmaking for
mature startups. The median late-stage pre-money valuation VC continues to be an incredibly investor-friendly market,
declined to $50.5 million, while the median venture-growth highlighted by the increase in down rounds over the
pre-money valuation declined 47.5% YoY. Of course, startups past couple of years. Q3 and Q4 down rounds were some
are aware of the current state of the market, and as such, of the highest counts we’ve tracked in the past decade
have opted to preserve existing cash reserves for as long as a proportion of completed deals each quarter. The
as possible to avoid raising capital in a less startup-friendly pricing pressure is coming from the relative lack of capital
fundraising environment. The median time between funding availability—at the late stages, spurred by the pullback in
rounds for Series D+ startups in 2023 stands at 1.78 years, nontraditional investors—and the rapid descent of valuations
making it the lengthiest duration between raises observed for many stages. While down rounds aren’t yet near the high
in over a decade. Looking to 2024, we expect these trends to proportions seen during the GFC, completed deals are coming
persist given numerous factors such as limited exit avenues with much more structure, which can keep top-line valuations
for mature enterprises. high while bringing higher dilution to founders and existing
investors should growth falter for the company. Cumulative
dividends are one of these structure terms now included in
the highest percentage of deals seen in the past decade.
4 2023 ANNUAL US VC VALUATIONS REPORT KEY TAKEAWAYS

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Pre-seed and seed valuations

Median seed deal size reaches new high at $3.3 million
Seed deal value ($M) dispersion by quarter
$10
$9
$8
$7
$6
$5
$4
$3
$2
$1
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018 2019 2020 2021 2022 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: US • *As of December 31, 2023
Pre-seed and seed valuations continue to defy the market Median pre-seed deal size saw little change
pricing slowdown, though the reason may be more that the Pre-seed deal value ($M) dispersion
bar for companies to raise capital has quickly risen, rather
$3.0
than because companies at these stages are fully protected
from market volatility. The median pre-money valuations for $2.5
pre-seed and seed in 2023 were $5.7 million and $12.0 million,
respectively—both figures were near or above record annual $2.0
highs. Deal counts at pre-seed and seed fell back to 2020
levels, but deal value remained high, suggestive of the higher $1.5
hurdle to raise.
$1.0
At pre-seed in 2023, companies did give up much higher
stakes to secure funding. At the median, pre-seed deals $0.5
involved a sale of 25% of the company. Though there may be
some sample error in that figure, such a deviation from past $0.0
values points to leverage residing strongly with investors and
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
puts a different context on the high valuations of the stage.

Top and bottom quartile range Top decile
Pre-seed and seed seeming insulated from the broader Median Bottom decile Average
slowdown in pricing is evident from these figures, but it may
be more important that the run-up in valuations for these
deals through 2021 was less drastic than later stages.
5 2023 ANNUAL US VC VALUATIONS REPORT PRE-SEED AND SEED VALUATIONS

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Median seed pre-money valuation up 33% in past Pre-seed stake acquired jumps significantly YoY
two years Annual pre-seed share acquired dispersion
Seed pre-money valuation ($M) dispersion
$35 45%
$30 40%
35%
$25
30%
$20 25%
$15 20%
15%
$10
10%
$5
5%
$0 0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Top and bottom quartile range Top decile Top and bottom quartile range Top decile
Median Bottom decile Average Median Bottom decile Average

Source: PitchBook • Geography: US • *As of December 31, 2023 Source: PitchBook • Geography: US • *As of December 31, 2023
Yes, valuations increased, and likely multiples applied on any As deal size continues rise, seed stakes inch
revenues being generated, but the median seed valuation back up
in 2021 was just 28% higher in 2021 than 2019, compared Seed share acquired dispersion
with 74% at early stage, 67.5% at late stage, and 130.2%
45%
for venture growth. Though the median seed valuation has
continued to ascend, in 2023 being 71.4% higher than 2019, 40%
the growth in deal size alongside valuations underscores the 35%
more formulaic approach to valuing companies with little to 30%
no revenue, and long-term growth expectations.
25%
20%
15%
10%
5%
0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Top and bottom quartile range Top decile
Median Bottom decile Average

6 2023 ANNUAL US VC VALUATIONS REPORT PRE-SEED AND SEED VALUATIONS

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Early-stage VC valuations
Median early-stage deal size down near 17% YoY
Early-stage VC deal value ($M) dispersion
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
A valuation bottleneck has been generated at the early stage, Median early-stage valuation hits three-year low
as seed valuations grow and early-stage valuations fall. While Early-stage VC pre-money valuation ($M) dispersion
the median has plateaued over the past few quarters, the
$250
$38.2 million annual figure is the lowest since 2020. Again,
context is important, as that figure remains more than 50%
higher than 2020. $200
The 2023 market remains much different than the year $150
2020 as compared. For one, the high number of companies
raising capital to lengthen runway is not what the market $100
in 2020 saw, at least outside of the initial pandemic fears
and response. This has led to a large number of companies
$50
raising rounds at valuations similar to previous raises. The
median valuation step-up (1.68x) has fallen to its lowest level
since 2013 (1.54x), as has the annualized valuation growth $0
rate, which calculated companies increasing their valuation
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
between rounds at a clip of just $12.5 million—in 2021, the

growth rate reached an annualized figure of $41.2 million. Top and bottom quartile range Top decile
Moving forward, the challenge for early-stage companies will
be to continue growth in an uncertain environment without
excessive dilution should a fundraise be needed in a lower-
multiple market.
7 2023 ANNUAL US VC VALUATIONS REPORT EARLY-STAGE VC VALUATIONS

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2023 median step-up falls to decade low Median early-stage velocity of value creation
Median and average early-stage VC valuation step-ups (VVC) falls below 2020 figures
by quarter Median early-stage VVC ($M) between rounds
5.0x $40 $35.9
$35
4.0x
$30
$25
3.0x
$11.0
$20
2.0x $15
$10
1.0x
$5
Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4
$0
2018 2019 2020 2021 2022 2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Median Average
A bright spot for early stage was the somewhat surprising Median relative velocity of value creation (RVVC)
Q4 2023 deal count that came in as the third-most-active in falls to lowest point in decade
our dataset, according to our estimates. Though deal value Median early-stage RVVC between rounds
remained low, the equity interest that such a high number of
140%
companies received indicates that investors are still willing 122.1%
to put capital to work in companies reaching the end of their
120%
runways, as opposed to pushing for acquisition or cutting
companies from portfolios. We may expect relatively high
100%
deal counts and low values in Q1 2024 as well if the surge is
simply due to companies being forced back to the fundraising
80%
market. Though, if deal counts fall back into significant 32.4%
decline, it may signal the venture market turning the page on
60%
companies reaching the end of their cash runways.
40%
20%
0%
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
8 2023 ANNUAL US VC VALUATIONS REPORT EARLY-STAGE VC VALUATIONS

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Late-stage VC valuations
Median late-stage deal size hits five-year low
Late-stage VC deal value ($M) dispersion
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
The late-stage venture landscape continues to face ongoing Median late-stage valuation falls nearly $10.0
challenges within the market, as depressed valuation million YoY
multiples and lower capital supply has constrained
dealmaking for many startups. In 2023, the annual median
Median and average late-stage VC valua
Late-stage VC pre-money valuation ($M) dispersion
$800
late-stage deal size fell to $5.9 million—a notable decrease of
nearly $3.0 million compared with 2022 and the lowest annual $700
median observed since 2017. $600
The annual median pre-money valuation for late-stage $500
ventures fell to $50.5 million in 2023, down from $60.0 million $400
in 2022. Our data also shows a palpable decrease in the
$300
enthusiasm surrounding ventures commanding exceptionally
high valuations. The top-decile late-stage valuation in 2023 $200
was just $359.0 million, significantly below the $750.0 million
$100
and $520.0 million observed in 2021 and 2022, respectively.
The diminishing top-decile valuations signal a waning investor $0
enthusiasm for the ultra-high-value startups within the late
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
stage that commanded substantial attention and investment

in the recent past. This shift in sentiment is attributed to a Top and bottom quartile range Top decile
variety of factors, including the current economic landscape,
scarce liquidity opportunities within the exit environment,
and a growing awareness of the challenges associated with
sustaining such elevated valuations.
10 2023 ANNUAL US VC VALUATIONS REPORT LATE-STAGE VC VALUATIONS

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Median late-stage step-up falls below 1.40x for Late-stage median time between rounds nears
first time since 2016 all-time high
Median and average late-stage VC valuation step-ups by quarter Median time (years) between rounds for late-stage companies
3.5x 2.0
1.8
1.8 1.7
3.0x 1.6
1.4
2.5x
1.2
1.0
2.0x
0.8
1.5x 0.6
0.4
1.0x
0.2
0.0
2018 2019 2020 2021 2022 2023*
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Median Average
Still, despite the decline in valuations, the annual median Median RVVC falls to just 14.5%
late-stage pre-money valuation in 2023 is the third-highest Median late-stage RVVC between rounds
annual in the last decade. Notably, the Q4 median valuation
70%
reached $61.5 million, marking the highest quarter of 2023
and the highest since Q2 2022. This may present a compelling
60% 44.8%
argument that high-quality deals continue to find success
despite challenging market conditions. The ability of some
50%
startups to thrive in a market characterized by declining
valuations suggests that they still likely possess robust
40%
business models and exhibit adaptability and innovation,
which are key attributes that attract investors in any
30% 14.5%
market environment.
20%
Nevertheless, while high-quality startups may continue to
flourish, a significant portion of companies are unable to
10%
command such leverage. The median time between rounds
for late-stage enterprises currently stands at 1.76 years, the
0%
longest of any stage, indicating that many startups facing
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
challenges aligning their valuations with investor expectations

are opting to wait out current market dynamics. Moreover,
for those that choose to raise now, our data shows a declining
trend in value creation between equity rounds. The 2023
median VVC witnessed a significant YoY decline of 61.6% to
$6.6 million, and the median RVVC for late-stage startups quarter median late-stage step-up multiple dropped to 1.33x,
fell to 14.5%—the lowest annual RVVC observed for this an eight-quarter decline and a nine-year quarterly low. Barring
stage since 2016. Step-up multiples have continued to suffer a sudden turnaround in current conditions, we expect these
throughout the year as well; in Q4 2023, the rolling four- challenges to persist for the late stage into 2024.
11 2023 ANNUAL US VC VALUATIONS REPORT LATE-STAGE VC VALUATIONS

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Venture-growth valuations
Average deal size declines to pre-pandemic levels
Venture-growth deal value ($M) dispersion
$250
$200
$150
$100
$50
$0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Venture-growth-stage startups have seen the most value Median pre-money valuation falls below $150.0
compression in 2023 relative to other stages of venture. This million for first time since 2018
is primarily because they are the most intricately entwined Venture-growth pre-money valuation ($M) dispersion
with fluctuations in public markets and have the closest
$4,000
proximity to many of the macroeconomic factors affecting
the venture ecosystem since the first half of 2022. Over the $3,500
past 18 months, revenue and EBITDA multiples, among others, $3,000
have trended downward for publicly traded companies. This
has intensified pricing pressure on the large cohort of mature $2,500
VC-backed enterprises that often rely on their publicly traded $2,000

counterparts as benchmarks. The annual median pre-money
$1,500
valuation for venture-growth-stage startups in 2023 declined
$128.3 million YoY to $141.5 million, the lowest annual figure $1,000
observed since 2018. Moreover, the median valuation in the $500
final quarter of the year, $168.7 million, was nearly $100.0
$0
million less than the preceding quarter—perhaps signaling a
more conservative pricing environment heading into 2024.
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
The Q4 decline may also indicate a growing cohort of lower Top and bottom quartile range Top decile
quality, mature startups that are unable to wait out the
current fundraising environment. The bottom-quartile pre-
money valuation for venture-growth-stage startups stands
at $52.3 million in 2023, which is the lowest figure observed
since 2020. Many of these startups, aware of the harsher
12 2023 ANNUAL US VC VALUATIONS REPORT VENTURE-GROWTH VALUATIONS

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Median venture-growth step-ups fall to decade low Median equity stake reaches five-year high
Median and average venture-growth valuation step-ups Venture-growth share acquired dispersion
by quarter
2.50x 40%
35%
2.25x
30%
2.00x 25%
20%
1.75x
15%
1.50x 10%
1.25x 5%
0%
1.00x
2013
2014
2015
2016
2017
2018
2019
2021
2020
2022
2023*
Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4
2018 2019 2020 2021 2022 2023* Top and bottom quartile range Top decile
Median Average Median Bottom decile Average

fundraising environment, have made efforts to extend existing Median VVC for venture-growth startups falls to
cash runways for as long as possible. The median time
just $2.4 million
between rounds for the venture-growth-stage in 2023 stands Median venture-growth VVC ($M) between rounds by stage
at 1.52 years, making it the lengthiest duration between raises
since 2018 and the second longest among all stages. In cases $120
where startups do have to raise, and consequently subject

their valuation to a reduced premium relative to prior years, $100
our data shows that many are pursuing smaller check sizes. $66.1
The median deal size in 2023 currently stands at $13.0 million, $80
the lowest since 2017, while the average deal size comes in at
$58.3 million, the lowest since 2019.
$60
This conservative approach is warranted in many cases given

the investor-friendly nature of the market. Reduced premiums $40
have made it difficult to create value between rounds, as
$2.4
evident in the 2023 median VVC and RVVC standing at $2.4 $20
million and 2.0%, respectively—representing decade lows
for both metrics. Moreover, we observed that 44.0% of the
$0
priced rounds collected in our data were flat or down rounds.
2013
2014
2015
2016
2017
2018
2019
2021
2022
2020
2023*
Consequently, investors seek to mitigate this lack of value

creation by taking larger equity stakes in the companies they
invest in; the 2023 median share acquired is currently sitting Source: PitchBook • Geography: US • *As of December 31, 2023
at a five-year high of 13.5%.

(NTI) participation and exit avenues for many venture-
Looking at 2024, we expect these trends to persist, given growth-stage businesses will continue to increase pressure
many of the influential factors take time to reverse course. and competition within the fundraising landscape for the
Beyond reduced premiums, the lack of nontraditional investor foreseeable future.
13 2023 ANNUAL US VC VALUATIONS REPORT VENTURE-GROWTH VALUATIONS

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A WORD FROM MORGAN STANLEY AT WORK

The importance of equity education in a
changing economic environment
Who is Morgan Stanley at Work?
Shawn Murphy
Morgan Stanley at Work provides workplace financial Chief Operating Officer and Chief Client Officer
benefits that help build financial confidence and foster

Shawn leads the client engagement
loyalty—helping companies attract and retain talent. Our strategy across the Global Equity Solutions
end-to-end offering spans Equity, Retirement, Deferred group, where she focuses on managing
Compensation, Executive Services, and Saving and Giving and deepening relationships across public
Solutions. Each solution includes a powerful combination and private companies by delivering
client-focused solutions.
of modern technology, insightful support, and dedicated
service, providing your employees with the knowledge and
tools to help make the most of their benefits and achieve their Amy Rodriguez
life goals. Executive Director, Head of Private Market
Relationship Management
Our global Equity Solutions provide innovative private Amy leads the Morgan Stanley at Work
companies with cap table and equity compensation Private Market Relationship Management
management, financial reporting, and 409A valuation team. With a decade of dedicated service, she
services. Our growing liquidity business is built on issuer- has helped support the equity programs of
fast-growing private companies.
led events, such as tender offers and continuous liquidity
programs. Since its inception, we have executed more than
100 private liquidity events and more than $19 billion in
secondary transaction volume as of Q3 2023. engaged with employees, contextualizing the current market
conditions and instilling confidence in the company’s long-
Why is equity education important for private term growth strategy.
companies and their equity plan participants in today’s
macroeconomic environment? Keep in mind that some employees may be in a heightened
state of financial stress due to the current macroeconomic
In today’s market environment, having a solid approach to environment. Our study found that employees are
equity plan education can help drive the effectiveness of increasingly looking to their employers for financial support
the overall equity program and be a key differentiator as and guidance. This is why it’s so important for employers
companies compete for talent. Our 2023 Liquidity Trends to lead the conversation on financial wellness, and equity
Report found that 73% of private company decision-makers compensation is a great place to start.
believe equity ownership is becoming increasingly important
for attracting and retaining talent. However, recent market What current gaps are you seeing in private companies’
uncertainty has greatly impacted private company valuations equity plan education?
and influenced how employees think about their equity.
Rather than being focused on the upside of their equity, There are three main gaps we see within equity education.
employees may have concerns about whether their equity First, there’s a misconception around the level of
has lost value or whether the current drought in IPOs might understanding employees have of equity compensation,
impact their personal financial plan and hinder future access including how equity grants are valued and how vesting
to liquidity. To preserve the long-term incentive value of works. We have found there’s a significant knowledge gap,
their equity plans, it’s imperative for companies to stay and that’s going to impact the effectiveness of an equity
14 2023 ANNUAL US VC VALUATIONS REPORT A WORD FROM MORGAN STANLEY AT WORK

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the coming year, secondary liquidity is likely to be a growing © 2024 Morgan Stanley Smith Barney LLC. Member SIPC.
area of interest for shareholders, especially while the IPO CRC 6199461-1/24
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15 2023 ANNUAL US VC VALUATIONS REPORT A WORD FROM MORGAN STANLEY AT WORK

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AI
AI deals driving median valuations higher across all stages
Median AI VC pre-money valuation ($M) by stage
$1,200
$1,000
$800
$553.5
$600
$400
$72.0
$256.3
$200 $48.0
$12.0 $66.6
$51.1
$0 $13.3
2017 2018 2019 2020 2021 2022 2023*
Seed Early-stage VC Late-stage VC Venture growth

AI founders give up less equity at each stage AI deal values higher than aggregate across stages
Median AI VC share acquired by stage Median AI VC deal value ($M) by stage
30% $80
24.7% 25.4% $70

25%
22.2% 22.8% $60
20.0%
20% 17.5% $50 $40.0
$40
15%
10.5% 10.7% $30 $13.0
10% $7.0
$20 $19.0
$3.0
5% $9.0
$10
$7.1
$3.5
0% $0
2017 2018 2019 2020 2021 2022 2023* 2017 2018 2019 2020 2021 2022 2023*
Seed Early-stage VC Seed Early-stage VC
Late-stage VC Venture growth Late-stage VC Venture growth
16 2023 ANNUAL US VC VALUATIONS REPORT AI

Sponsored by
Average AI seed step-up bucks market trend Early-stage AI step-ups in line with market
in 2023 Rolling four-quarter median and average AI early-stage VC
Rolling four-quarter median and average AI seed VC valuation step-up
valuation step-up
3.0x 4.5x
4.0x
2.5x
3.5x
3.0x
2.0x
2.5x
2.0x
1.5x
1.5x
1.0x 1.0x
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018 2019 2020 2021 2022 2023* 2018 2019 2020 2021 2022 2023*
Median Average Median Average

Outliers bring average AI late-stage step-up AI venture-growth step-ups in line with market
above market Rolling four-quarter median and average AI venture-growth
Rolling four-quarter median and average AI late-stage VC valuation step-up
valuation step-up
3.5x 2.5x
3.0x
2.0x
2.5x
2.0x
1.5x
1.5x
1.0x 1.0x
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018 2019 2020 2021 2022 2023* 2018 2019 2020 2021 2022 2023*
Median Average Median Average
17 2023 ANNUAL US VC VALUATIONS REPORT AI

Sponsored by
Biopharma
Early-stage and late-stage pre-money valuations increase as companies stay private longer
Median biopharma VC pre-money valuation ($M) by stage
$100
$85.0
$76.1
$80
$80.0
$56.5
$60
$40
$15.7 $15.8
$20
$0
2020 2021 2022 2023*
Seed Early-stage VC Late-stage VC

Biopharma founders losing more shares in early- VC Investors making larger bets for early-stage
stage VC rounds as investors gain shares startups for longer runways
Median VC share acquired in biopharma companies by stage Median biopharma VC deal value ($M) by stage
50% $50.0
45.1% $50
45% 38.7%
$45
38.5%
40% 37.3% $38.5
$40
35% $35
28.8%
30% $30
23.3% $25
25%
$18.9
$20 $12.6
20%
$15 $14.0 $12.0
15%
$10 $8.2
10%
$5 $8.0
5% $0
0% 2020 2021 2022 2023*
2020 2021 2022 2023* Seed Early-stage VC
Seed Early-stage VC Late-stage VC Late-stage VC Venture growth
18 2023 ANNUAL US VC VALUATIONS REPORT BIOPHARMA

Sponsored by
Small step-up for average early-stage VC valuations from last quarter driven by outliers
Rolling four-quarter median and average biopharma early-stage VC valuation
4.0x
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020 2021 2022 2023*
Median Average
Small step-down for average late-stage VC valuations from last quarter as funds are cautious
Rolling four-quarter median and average biopharma late-stage VC valuation
3.0x
2.5x
2.0x
1.5x
1.0x
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020 2021 2022 2023*
Median Average
19 2023 ANNUAL US VC VALUATIONS REPORT BIOPHARMA

Sponsored by
A WORD FROM MINTZ

Frequently asked questions for private
companies considering a reverse merger
Is a reverse merger a good alternative to an IPO?
William “Bill” Hicks
We believe this is the wrong question—we view a reverse Member/Co-Chair, Life Sciences Practice
merger as “going public” during your cross-over round, rather

As co-chair of Mintz’s Life Sciences Practice,
than as an alternative to an IPO. This is because the reverse Bill represents some of the life sciences
merger process is a privately negotiated investment process industry’s most prominent investors and
that is more like a cross-over round than an IPO, with its issuers in structuring and executing IPOs,
marketing and price discovery efforts, including testing-the- cross-over investments, alternative public
offerings—including APOs—reverse mergers
waters and a road show. And having your company listed
and Form 10 transactions, follow-on public offerings, CMPOs,
and registered with the Securities and Exchange Commission
registered directs, PIPEs, and private placements. Bill also represents
(SEC) as a result of the reverse merger sets up the company investors in customized investments in public companies, including
for a faster IPO (its first public offering) down the road when structured PIPEs and registered directs.
the time is right.
John Rudy
Reverse mergers can be very effective if the cash in the “fallen Member/Co-Chair, Securities & Capital
angel” (the existing public company) effectively supplements Markets Practice
the amount of private financing available—including
As a senior member of Mintz’s Securities
potentially via a concurrent PIPE, as further discussed below.
& Capital Markets Practice, John focuses
In addition, the fact that the company will be listed at the on the representation of public and private
end of the reverse merger process may make the deal more companies and investment banks in capital
appealing to interested public investors than a traditional markets transactions. He also advises
cross-over round. public and private companies and investors in connection with
M&As, equity and debt financings, and securities and general
corporate matters.
How easy is it to find a fallen angel to reverse merge with?
There have been a large number of fallen angels in the

last couple of years. However, for those fallen angels with
significant cash, the competition to be picked as a reverse However, a concurrent PIPE poses a number of challenges:
merger candidate is intense. Accordingly, the private
company cannot control when or if it will find a dancing • Time to liquidity: In a market that has been challenging,
partner. That said, certain investment banks tend to represent securing a PIPE for a reverse merger can be even more
a large number of fallen angels so that an interested private difficult than executing a PIPE for an “already public”
company can effectively get in front of many fallen angels by company. In a PIPE for a public company, the financing is
talking to those investment banks. typically closed within a few days of signing the purchase
agreement, and the shares are typically registered for
Should we raise a PIPE at the same time as the resale and tradable after 30 to 60 days. In a reverse
reverse merger? merger, the PIPE purchase agreement is signed when
the merger agreement is signed, but the financing does
The conventional view has been that a concurrent PIPE not close until the merger agreement closes three to five
provides confirmation that public investors are interested months later after SEC review and shareholder approval.
in the business of the private company; validation of the If the shares are then registered for resale, there is further
valuation negotiated by the parties; and additional cash to delay until the investors are able to sell. This “time to
support the combined company’s operations. liquidity” is a relevant factor for some investors.
20 2023 ANNUAL US VC VALUATIONS REPORT A WORD FROM MINTZ

Sponsored by
• Intersection of PIPE and merger negotiations: If PIPE What is the impact of the SEC Staff position expressed
investors want a lower valuation than the company in recent comment letters to the resale registration
negotiates with its merger partner, that can inject statements filed after the closing of reverse mergers and a
uncertainty into the merger process. recent release?
Deal certainty and speed are critical in reverse mergers. If This is a developing situation, so we will see how it plays
the combined cash balance of the fallen angel and the private out over time. Currently, it appears that the SEC Staff views
company are sufficient to satisfy Nasdaq and fund operations transactions that they consider reverse mergers to be a
for an adequate amount of time, it may make sense to close merger with a shell company, and as a result, views the post-
the reverse merger as quickly as possible, and then later do closing company as ineligible to file a Form S-3 at the outset.
a PIPE (or other financing) as a public company with a stock Because of this, it may be impractical to register affiliates of
listing. Potential investors can then see how the deal has the combined company for resale for a year after the reverse
traded and should not be faced with the prolonged illiquidity merger closes. There are other positions the SEC Staff may
period associated with a concurrent PIPE. take that would follow from a position that the transaction
involved a shell company.
Can non-US companies access Nasdaq through a
reverse merger? Are there types of reverse mergers other than fallen
angel deals?
Yes—at least in many cases. Technically, a merger is a
US state law statutory construct, so a reverse merger Yes. There is an alternative public offering process that has
type transaction with a non-US entity will usually not be been used by a number of companies with prominent private
a statutory merger. But there is often a tax-acceptable investors: The company merges with a true Form 10 shell
alternative, such as a share exchange, under the laws of the company; raises capital from institutional investors and retail
applicable non-US jurisdiction. investors in a concurrent PIPE; trades on the over-the-counter
market after closing; and then uplists to Nasdaq when positive
Many private non-US issuers have gone public and listed on business developments or other circumstances permit it to
Nasdaq by means of a share exchange transaction. Even some raise $40 million or more in a public offering. This can be very
non-US issuers that were traded on their local exchange have attractive for certain private companies, as all shareholders
listed on Nasdaq via a reverse merger type transaction. This after the deal will have decided to invest in that company (not
typically involves additional home country and local exchange the former business of a fallen angel), and the company’s
rules, which must be navigated. In some cases, this can be true IPO and up-listing to Nasdaq can be timed with good
managed by having the non-US company remain the “top-co” market conditions, positive business developments, or other
over the fallen angel, and having that company apply for an results. In addition, the true IPO can then typically be closed
initial listing as part of the closing of the transaction. in around a month, because the company’s disclosure will
have already been reviewed by the SEC as part of the reverse
merger process.
21 2023 ANNUAL US VC VALUATIONS REPORT A WORD FROM MINTZ

Sponsored by
Nontraditional investors
Early-stage valuations dip YoY
Median early-stage pre-money valuation ($M) by investor type
$70
$60.0
$60
$50.0
$50
$40
$30.0
$32.0
$30
$20
$10
$0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Nontraditional investor No nontraditional investor

The rapid descent of NTI activity was most acutely felt at Late-stage valuations without NTI participation rise
the later stages. Q2 through Q4 2023 were the three lowest Median late-stage pre-money valuation ($M) by investor type
quarters of deal value on NTI deals since Q1 2018. Though
$120
dry powder held by VC firms remains at record highs, the
risk profiles of nontraditional investors—and generally large
$100 $90.0
amounts of capital to deploy held by these institutions—has
become an integral piece of late-stage and venture-growth- $80.0
stage deals, as companies have often opted to remain private. $80
Though valuations of deals with nontraditional investors have $60

declined significantly across stages, they continue to price
well higher than deals without nontraditional involvement.
$40 $33.0 $34.0
The $80.0 million median late-stage valuation in deals with
non-VC investors is still $46.0 million higher than in deals
$20
without, even though the $80 million annual figure is a decline
of 20% over the past two years. Deals without NTI investors
have hit a plateau during the same time frame, sitting at $34.0 $0
million in 2023, which is just $1 million, or roughly 3%, lower 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
than 2021. Nontraditional investor No nontraditional investor
The retreat of nontraditional deal valuations highlights the
shift in risk allocation by nontraditionals.
22 2023 ANNUAL US VC VALUATIONS REPORT NONTRADITIONAL INVESTORS

Sponsored by
NTI participation falls to 2018/2019 levels Median early-stage NTI deal size remains high
US VC deal activity with nontraditional VC investor participation Early-stage VC deal value ($M) dispersion with NTI participation
by quarter
$25 180 $80

160 $70
$20 140
$60
120
$15 $50
100
$40
80
$10
$30
60
40 $20
$5
20 $10
$0 0 $0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
2018 2019 2020 2021 2022 2023* Top and bottom quartile range Top decile Median
Deal value ($B) Deal count Bottom decile Average
Hedge funds and mutual funds were willing to pay high prices At late-stage, deal sizes continue decline
for illiquid, private companies, because the exit markets were Late-stage VC deal value ($M) dispersion with NTI participation
accommodating with quick and high exit returns. The shift
$140
of the market over the past two years has quickly pushed
nontraditionals out, pulling down capital availability and $120
further pressuring prices.
$100
It should be expected that nontraditional investors will
$80
continue at the relatively lower activity levels until the
public markets begin to return to a more accommodating
$60
environment. In a volatile, uncertain market, yield can be
found in many different asset classes or strategies. With the $40
expectation that interest rates stay higher for longer, and
with recession worries still abound within the market, it’s $20
unlikely that VC-backed companies will be able to exit at a
$0
frequency that entices nontraditional investors because of
lower illiquidity risk, or at the high prices that cause cross- 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
over investors to miss out on potential high returns by simply Top and bottom quartile range Top decile Median
waiting to invest once companies are public. Bottom decile Average
23 2023 ANNUAL US VC VALUATIONS REPORT NONTRADITIONAL INVESTORS

Sponsored by
Liquidity
Median public listing valuation falls to decade low
Exit valuation ($M) dispersion for public listings
$5,000
$4,000
$3,000
$2,000
$1,000
$0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Throughout 2023, the lack of exit opportunities continued Median acquisition price exceeds 2022 figures
to plague startups and their investors. Despite notable Exit valuation ($M) dispersion for acquisitions
IPOs such as Instacart and Cava, the public listing area
$700
experienced significant challenges. The median exit valuation
for public listings in 2023 saw a YoY decline of roughly $117.0 $600
million, reaching $110.6 million and marking the lowest
annual median valuation observed in over a decade. This $500
record decline may be a surprise to some given how well
$400
public markets performed in 2023; the S&P 500 rallied over
26.0% this year, including dividends, while the Nasdaq $300
soared 43.0%. Of course, it is important to note that this
performance was heavily driven by mega cap tech giants $200
including Amazon, Apple, Nvidia, and Tesla. If we look outside
of the “Magnificent Seven,” many stocks fell short relative to $100
public index benchmarks; for example, 72% of the S&P 500
$0
components underperformed the index in 2023.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
This discrepancy is a significant indicator that the broader Top and bottom quartile range Top decile Median
market has struggled to mirror the success enjoyed by these Bottom decile Average
tech giants and raises concerns about the overall health and
resilience of the public market. The stark contrast between
the resilience of mega tech companies and the struggles
of many others creates a challenging landscape for new
24 2023 ANNUAL US VC VALUATIONS REPORT LIQUIDITY

Sponsored by
Median step-up for public listings falls below 1.0x

Median VC valuation step-up at exit by type
2.2x
2.0x
1.8x
1.6x
1.4x
1.2x
1.0x
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Acquisition Public listing
entrants, emphasizing the need for strategic and cautious segments. Acquirers may also be willing to pay a premium for
decision-making. a controlling stake in a company, supporting M&A valuations
even in an environment where overall startup valuations may
Alternatively, for those who opt-out of going public, the be under pressure.
acquisition route may emerge as the most viable route
for liquidity. While overall M&A activity has been on a When looking ahead, it is important to have a holistic
decline, valuations have been notably resilient this year. view. Many expect that interest rates may begin to lower
The median exit valuation for acquisitions in 2023 stands in 2024, which could theoretically create a more favorable
at $61.4 million, which is 25.1% higher than the $49.1 million environment for both IPOs and M&A. However, this sentiment
observed in 2022. We’ve long discussed the reasons for the is simultaneously affected by several economic uncertainties,
resiliency of M&A relative to public listings in the current geopolitical events, and other external factors. The first half
macroeconomic environment. For acquiring companies, a of 2024 will likely be a wait-and-see period for many as they
well-aligned acquisition can offer immediate benefits and observe how economic conditions evolve before committing
cost-saving opportunities, as well as access to new customer to significant strategic moves later in the year.
25 2023 ANNUAL US VC VALUATIONS REPORT LIQUIDITY

Sponsored by
Deal terms
US market continues strong investor friendliness
VC dealmaking indicator by quarter
100
90
80
70
60
50
40
30
20
10
0
2018 2019 2020 2021 2022 2023*
Early-stage index Late-stage index Venture-growth-stage index
In 2023, down rounds constituted 14.2% of completed Nearly quarter of deals include cumulative
financings; while that is the highest figure since 2017, it dividends
remains surprisingly low for a market struggling with high Deals with cumulative dividends as share of all dividends
valuations of the past. Our estimated down round figures
25%
for Q3 and Q4 2023 were higher than the annual figure but 23.1%
remain only slightly above some quarterly figures over the 20.6%
past decade. This suggests that structure has been a larger
20%
piece of the venture market over the past year, as companies
and investors negotiate market pricing. Larger liquidation
multiples and participating preferred shares haven’t become
15%
significant inclusions in terms sheets, but cumulative
dividends were more common in 2023 than any year since
2013, and those dividends increased in size. 10%
Increasing dividends isn’t necessarily the structure that

investors have advised their portfolio companies to resist, 5%
though the increase in cumulative dividends will have
impacts on returns by essentially guaranteeing a certain rate
return beyond the pro-rata stake of investors holding them. 0%
This downside protection is naturally more common in an
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
uncertain exit environment when cash-strapped startups in
need of capital are compelled to provide extra incentive to
new investors. With the liquidity crunch continuing strong
26 2023 ANNUAL US VC VALUATIONS REPORT DEAL TERMS

Sponsored by
Average dividend highest since 2018 Participating shares still low as a proportion
Average dividend of total
Deals with liquidation participation as a share of all VC deals
7.5% 35%
7.4% 30%
7.3%
25%
7.2%
7.2%
20%
7.1%
15%
7.0%
7.0%
10% 8.8% 8.8%
6.9%
6.8% 5%
6.7% 0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
into 2024, this is a protective term that could become even Down rounds likely to continue increase
more common over the next few quarters. Share of VC deals by up, flat, or down rounds by quarter
100% Down
Now that the market is two years post valuation highs,
companies that raised during those years but have pushed off 90% Flat
new fundraises through layoffs or slower growth investment 80% Up
should be expected to run low on cash in the coming future,
70%
and subsequently forced back into raising. With negotiation
leverage squarely in the corner of investors, deal structure will 60%
remain high in 2024. 50%
40%
30%
20%
10%
0%
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2018 2019 2020 2021 2022 2023*
27 2023 ANNUAL US VC VALUATIONS REPORT DEAL TERMS

Additional research
Venture capital
Q4 2023 PitchBook-NVCA Q1 2024 Analyst Note:

Venture Monitor Vertical Opportunities in a
Reopened IPO Window
Download the report here
Q3 2023 Analyst Note: 2023 Annual European

Analyzing the IPO Venture Report
Market Outlook
More research available at pitchbook.com/news/reports
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2023

What can you do today to be set up for

Request a Transaction Readiness Assessment

1 Morgan Stanley at Work 2023 Liquidity Trends Report

Dylan Cox, CFA Head of Private Markets Research

Venture-growth valuations 12 Institutional Research Group

A word from Morgan Stanley At Work 14 Analysis

AI 16 Kyle Stanford, CAIA

A word from Mintz 20 Vincent Harrison

Published on February 7, 2024

Click here for PitchBook’s report methodologies.

3 2023 ANNUAL US VC VALUATIONS REPORT

4 2023 ANNUAL US VC VALUATIONS REPORT KEY TAKEAWAYS

Pre-seed and seed valuations

2018 2019 2020 2021 2022 2023*

puts a different context on the high valuations of the stage.

5 2023 ANNUAL US VC VALUATIONS REPORT PRE-SEED AND SEED VALUATIONS

Median Bottom decile Average Median Bottom decile Average

Top and bottom quartile range Top decile

Median Bottom decile Average

6 2023 ANNUAL US VC VALUATIONS REPORT PRE-SEED AND SEED VALUATIONS

between rounds at a clip of just $12.5 million—in 2021, the

7 2023 ANNUAL US VC VALUATIONS REPORT EARLY-STAGE VC VALUATIONS

5.0x $40 $35.9

Source: PitchBook • Geography: US • *As of December 31, 2023

8 2023 ANNUAL US VC VALUATIONS REPORT EARLY-STAGE VC VALUATIONS

• Helping entrepreneurs launch and protect great ideas

The annual median pre-money valuation for late-stage $500

stage that commanded substantial attention and investment

10 2023 ANNUAL US VC VALUATIONS REPORT LATE-STAGE VC VALUATIONS

challenges aligning their valuations with investor expectations

11 2023 ANNUAL US VC VALUATIONS REPORT LATE-STAGE VC VALUATIONS

VC-backed enterprises that often rely on their publicly traded $2,000

12 2023 ANNUAL US VC VALUATIONS REPORT VENTURE-GROWTH VALUATIONS

Median Average Median Bottom decile Average

where startups do have to raise, and consequently subject

This conservative approach is warranted in many cases given

Consequently, investors seek to mitigate this lack of value

at a five-year high of 13.5%.

13 2023 ANNUAL US VC VALUATIONS REPORT VENTURE-GROWTH VALUATIONS

A WORD FROM MORGAN STANLEY AT WORK

benefits that help build financial confidence and foster

14 2023 ANNUAL US VC VALUATIONS REPORT A WORD FROM MORGAN STANLEY AT WORK

plan—the less employees understand their equity, the less Disclosures

Whether you’re a global corporation or a startup, we

15 2023 ANNUAL US VC VALUATIONS REPORT A WORD FROM MORGAN STANLEY AT WORK

Seed Early-stage VC Late-stage VC Venture growth

24.7% 25.4% $70

16 2023 ANNUAL US VC VALUATIONS REPORT AI

Median Average Median Average

17 2023 ANNUAL US VC VALUATIONS REPORT AI

Seed Early-stage VC Late-stage VC

Seed Early-stage VC Late-stage VC Late-stage VC Venture growth

18 2023 ANNUAL US VC VALUATIONS REPORT BIOPHARMA

19 2023 ANNUAL US VC VALUATIONS REPORT BIOPHARMA

A WORD FROM MINTZ

merger as “going public” during your cross-over round, rather

There have been a large number of fallen angels in the

20 2023 ANNUAL US VC VALUATIONS REPORT A WORD FROM MINTZ

21 2023 ANNUAL US VC VALUATIONS REPORT A WORD FROM MINTZ

Nontraditional investor No nontraditional investor

Though valuations of deals with nontraditional investors have $60