Early-stage startup valuations 2022/23.
In the complex world of startup valuations, transparency and understanding are crucial for early-stage founders. At JVH Ventures, we believe in fostering mutual understanding by sharing our insights and real numbers from our investment journey.
As there continue to be a lot of questions from early-stage founders to set or negotiate their valuation, we decided not to just share our underlying mechanics, but also show you the actual numbers of what we saw and did since the beginning of 2022.
In this article, we will provide valuable orientation and shed light on the investor's perspective by examining over 1,000 deals and showcasing our own investment experiences since the beginning of 2022. By deciphering the complexities of startup valuations, we aim to empower founders and create a more transparent startup ecosystem.
Unveiling Average Valuations: A Glimpse into our Total Deal Flow
In order to provide a comprehensive overview, we have compiled a substantial dataset for early-stage valuations based on the communicated targets of founders during their fundraising efforts. Although some founders did not disclose their numbers immediately or opted for convertible loans (CLAs), our analysis still offers valuable guidance for early-stage founders.
Based on our analysis of the past 17 months, the average target pre-money valuation of the startups we encountered was approximately €8.2 million. Furthermore, the average raising volume target was around €1.7 million, suggesting an average post-money valuation close to €10 million. These figures encompass startups from various verticals and stages of their entrepreneurial journey.
Breaking down targets per stage
To gain a deeper understanding, let's break down the average values based on different stages. While our primary focus lies on early-stage companies, we also receive deal flow for later-stage fundraising. Since the beginning of 2022, approximately 60% of the deals we assessed were raising their first round, while 25% were in their second round, and the remaining 15% had reached later-stage rounds.
Surprisingly, the average raise target volume for both first and second round startups was quite similar, with €1.4 million and €1.7 million, respectively. However, as startups progressed to their third round and beyond, the average fundraising volume witnessed a substantial increase, reaching close to €5 million. Correspondingly, the target post-money valuations also reflected this trend, with the first and second round fundraising averaging around €8 million and €10 million, respectively. Notably, the third round and beyond exhibited larger fundraising ambitions, with an average post-money valuation of approximately €28 million.
Differences in Business Models: B2B vs. B2C
While our main focus lies on B2B (business-to-business) startups, we were keen to explore the disparities between business-to-consumer (B2C) and B2B companies. Interestingly, our analysis revealed that both models did not exhibit massive variations. B2B startups targeted slightly larger fundraising rounds (€2.0 million vs. €1.4 million) and demanded higher pre-money valuations (€8.7 million vs. €7.8 million).
As these numbers only constitute the target values of the founders, it’s difficult to draw finite conclusions here - but we assume that the macro-economic downturn and lower confidence in consumer topics currently are also reflected in company valuations.
Insights from Our Actual Investments
Since the start of 2022, we made eight investments. We have excluded two outlier investments that fell outside our regular investment scope but were strategically aligned with our goals. Removing these outliers allows us to highlight our typical investment patterns.
The average post-money valuation of JVH investments since 2022 was €9.6 million, with an average cap of convertible loans (CLAs) at €8.5 million. It is important to note that these investments span both first and second-round stages - from pre-product startups to companies generating substantial revenue and traction (e.g. annual recurring revenue (ARR) exceeding €1 million).
If we compare our actual investments to the total deal flow, we are more or less on par with the overall average. Accounted for the fact that we receive some later stage deals we are very close to the average post money valuation of €9.9 million for second round fundraising and above the €7.8 million of first round fundraising companies of the total deal flow.
Interestingly, the average dilution was considerably above the target dilution of all incoming startup investment requests (+32%). For us, this indicates that exciting startups are often not optimizing their dilution and rather tend to accept to give away more of their equity, in return for well-fitting partners and extra cash (especially in difficult times right now).
Conclusion
As transparency is one of our core values, we at JVH Ventures aim to take the secrecy out of everything around valuation and startup investment terms.
Through our analysis of over 1,000 deals, we have gained valuable insights into the average post-money valuations of early-stage startups. Our findings indicate that the average post-money valuation hovers around €10 million, while our own actual investments had a post-money valuation of around €9.6 million, providing founders with a benchmark to better understand and negotiate their own valuations. In addition, we think it’s always important to understand the ranges and mechanics behind these overall averages and put them into perspective (e.g. our deals ranged from >€5 million to >€15 million).
At JVH Ventures, our mission extends beyond financial investment. We are dedicated to empowering founders by providing them with the knowledge and insights they need to navigate the complexities of startup valuations. By fostering transparency and understanding, we strive to create a thriving startup ecosystem that benefits both entrepreneurs and investors alike.
Are you a founder and don’t know how to think about your valuation?
Hit us up, we are happy to give feedback: www.jvh-ventures.com/pitch