The first half of 2018 has seen early stage startups in the USA raising more money and at higher valuations. Though on the surface this seems great for founders, the proportion of down rounds at later stages more than doubled from Q1 2018 to Q2 2018. While only 7% of financings in the first quarter of 2018 suffered a down round, 18% of financings in the subsequent quarter failed to meet investor expectations. This is a warning sign that things are heating up in venture capital and that both investors and founders should be wary of unnecessarily high valuations and large rounds.
These figures and other interesting statistics can be found in WSGR’s Financing Trends for 1H 2018 report. Initially, I couldn’t find a UK equivalent data set. So I wagered that it’s possible to infer (at least roughly) the UK state of play with a simple “European” discount (I’ve found deals in Europe tend to be cheaper than in the US by around 25%). Applying this discount to US figures gives the numbers in grey in the table at the end of this post. The results are far from scientific but it’s a helpful napkin guesstimate.
Update 6 Sept 2018:
Since publishing this blog, Beauhurst reached out and offered the actual numbers for the UK. This data has been appended to the table below.
NB. Seed round here typically means an institutional Seed financing rather than earlier rounds of friends, family, and angel money.