The Great Reset: Private companies trading close to their second-to-last primary round

In this short clip from our Q3 Forge Investment Outlook webinar, Andrew Alden, Senior Director of Quantitative Analytics, shares insights on how private company valuations have changed over the last four years.

Learn more about “The Great Reset” and find additional private market data in the Forge Investment Outlook report.

Dan ChaparianVP of Product Marketing, Forge

So, let's talk a little bit more about where these valuations to today. It seems like many private companies are still trading at relatively deep discounts as you just explained

They're trading at around a 52% median discount to their last primary fundraising round. Forge global CEO, Kelly Rodriques has been commenting recently that these discounts represent something of a “Great Reset” of private company valuations. Now, as a result of the secondary market transactions that take place on the Forge platform, Forge has a unique vantage point on pricing relative to current valuations and maybe even relative to previous round valuations.

So, can you tell us more about what the data is saying here?

Andrew AldenSenior Director of Quantitative Analytics, Forge

Yes, I'd be happy to. One chart we put together recently to help us understand where we are right now is the following

in which we plot the median trade premium/discounts relative to the last funding round as well as to the second to last funding round. In hindsight, we all know that the last round for many companies done in 2020 or 2021 was done in another era of cheaper money and higher valuations. Therefore, maybe it's helpful to see how prices compared to a period prior to that.

Very interestingly, from about 2022 onwards, we're seeing trade premium/discounts to the second to last round to be close to flat to those rounds. And currently at -5%. This tells us that from a premium/discount standpoint, the current market has mostly wiped out the prices received in the last primary round. It also hints perhaps the prices are normalizing. Premium/discounts to the second to last round have been more stable for 9 months or so. And perhaps this is a helpful reference point to consider - measuring prices relative to a funding round done in a less frothy time than the last round.

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