Early stage tech valuations are still close to where they were at the end of last year

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Valuations in late stage private tech may have taken a beating, but I’m seeing limited impact in the early stage ecosystem so far. On average, early stage valuations are still close to where they were at the end of last year.

According to data, from Q1 2022 onwards, $1M on $10M and $2M on $20M post money SAFE are the new normals for pre-seed and seed valuations. That said, anecdotally, I’m seeing some founders being more proactive and course-correcting their expectations on pre-seed/seed valuations.

Pre-seed rounds

Seed rounds

There are significantly more market participants in the early stages - operator funds, scout funds, even crossover funds have spread their reach to the seed stage.

Existing seed stage funds are also getting bigger.

Seed VCs that previously had $75M to $100M funds now have $200M to $350M funds. The $750K to $2.5M checks they used to write are now $2M to $5M checks.

They’re more price insensitive and are able to stomach an extra $10M to $15M of post money valuation for the same ownership %.

No one really knows what the macroeconomic situation will be in 1-3 years. But we know these:

• Public tech companies are still growing quickly

• The arbitrage in private tech has been found out and capital has been pouring in from all over the place

• Startups in the earliest stages are generally still “immune” to macro-movements. Companies founded today are built for the next 3-10+ years horizon, not now

• Early stage private tech is still a great asset class if you pick right, are in the right networks etc - a very different story for late stage tech right now

• More venture funds are being started, funds are getting bigger

• It takes 10+ years to know if a fund is truly performant. So net new addition of funds to ecosystem will still be positive for the next few years.

All this is to say that I think these average early stage valuations are here to stay for now. In the next few months, I can see how some $40-50M valuations get closer to $25-35M, and how some $20-25M get closer to $13-17M.

Funds may have to rely on asymmetric access/relationships/information and invest in non-obvious areas to seek better valuations.