Venture capital valuations

We’ve written many times recently about the high valuations of technology companies and other stocks with a secular growth story. But this trend is not confined to listed markets. Pitchbook have released new data that show that valuation in US venture capital investments is also surging.

Early stage venture capital deals have roughly doubled over the last year and a half.

Source: Pitchbook

And this is largely driven by valuation increases, not by revenue increases:

Source: Pitchbook

We’re also seeing surging step-ups in valuations at listing. (That is, the increase in the valuation multiple between the listing and the last round of financing.) A few years ago this was 1.5 times, but is now closer to 2 times, or 2.8 times for acquisitions.

Source: Pitchbook

This is not confined to listings. Step-ups in valuations are higher in 2021 than they’ve ever been for early and late stage venture capital funding too. These surges in valuation help explain the strong returns in unlisted equity investments, but they make us more cautious on the outlook for unlisted equity in future.

More details are available from Pitchbook here.

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