Early and Growth Stage Valuations Slump in Q3

Third quarter venture deal making saw a softening of early and growth stage valuations, but a continued high level of competition in later rounds.

Median pre-money valuations fell in Series A and B deals, and up rounds across all stages of venture financing slumped modestly to 71% of deals compared with 77% in the second quarter, the law firm Cooley reports.

At the same time, median pre-money valuations in Series C deals jumped to $70 million, from $55 million in the second quarter, and held steady at $100 million in Series D and later rounds.

Cooley said it based its analysis on 81 transactions it handled representing $960 million in invested capital. Forty-two percent of deals were Series A rounds, an increase from earlier this year. Overall transaction volume was down from the first and second quarters.

Reflecting some investor caution, the median pre-money valuation in Series A deals was $7 million, down from $8 million in the second quarter, and for Series B deals was $22 million, down from $35 million, Cooley said.

Deals structured in tranches and with pay-to-play provisions showed noticeable increases, more signs of investor caution. However, deals with pre-money valuations of more than $100 million rose slightly to 16% of transactions.

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