Late-stage startup valuations drop by 57% in Q3 2022
- ByStartupStory | December 1, 2022
Late-stage tech companies are seeing their valuations drop by almost 40 percent as the funding winter continues. According to experts, the impact is higher on consumer tech companies as compared to B2B players. This is happening because of the high customer acquisition costs in B2C and no clear path when it comes to profitability.
“Consumer companies have fallen off the cliff, no consumer tech company is investing in growth and it has impacted their operational revenue as well. Startup valuations, especially the late stage, are down by 40 percent across the board. The current slowdown is not like the 2008 crash: it is more like the dot-com bust because tech valuations have taken a major hit,” said Madhu Shalini Iyer, Partner at Rocketship.vc.
Umakanta Panigrahi, MD, Valuation Advisory Services, Kroll said in a statement, “We are in fact seeing mark down in late stage company valuations, anywhere between 20 to 40 percent. Tech companies have been impacted more as compared to others. For example, we have seen high markdowns in edtech. That’s why you see companies laying off employees to improve the profitability and retain their valuations.”
He further said that the impact on B2B is much lesser than B2C, both in terms of valuations and operational parameters, like revenue and profitability. While discussing why the valuations of B2C companies have taken a hit, Panigrahi said, “Investors see funding risk in B2C companies because consumer tech companies have to constantly spend money on customer acquisition which makes it very difficult to get revenue. This is no more a selling point to investors and thus the drop in valuations.”
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