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2023 was a great year for many people: Taylor Swift, Pedro Pascal, people who used AI buzzwords to sound smarter at parties.
If you were a startup founder or venture capital investor, though, chances are that last year wasn’t so hot. PitchBook’s release of its annual US VC Valuations Report showed that deal sizes fell for startups almost across the board, and for some stages to lows they haven’t seen in five or ten years.
Simply put, it’s gotten harder to land a solid exit as public offerings have been putting up smaller windfalls for founders and VCs. The median startup going public last year had its lowest valuation in more than a decade, the report said, another example of the divide between big tech and everyone else.
So huge was the success of the “Magnificent Seven” stocks in 2023—remember, Tesla didn’t start self-driving off a cliff until this year—that it obscured how poorly many of the largest public companies were doing. Nearly three in four S&P companies fared worse than the index, according to the report.
Even some of the report’s positives appeared a bit less glowy on second glance. Take the median seed funding deal, which hit $3.3 million, its highest yet. Woohoo! Oh, wait: “The reason may be more that the bar for companies to raise capital has quickly risen,” leaving out those who would have raised smaller sums.
Then there’s the 25.1% growth in the median valuation of startups that were bought last year. Great, right? But that $61.4 million is still nowhere near the $110.6 million valuation of the median startup that went public in 2023—even though the median startup valuation of an IPO exit had fallen 51.4% from the year before—and the amount that acquired companies’ valuations have grown is still its lowest in nearly a decade.
If you want to see a group of startups that did thoroughly enjoy 2023, you’re going to have to read more about AI. Their deals were bigger, their valuations higher, and their founders hung on to more of the company than peers in other fields.