In this short clip from our Q3 Forge Investment Outlook webinar, Andrew Alden, Senior Director of Quantitative Analytics, discusses primary fundraising trends in the private market.
Learn more about “The Great Reset” and find additional private market data in the Forge Investment Outlook report.
Everyone talks about less easy access to capital now and everyone knows intuitively that we came out of a really frothy period and things have materially changed. But where are we now and what are we really seeing in our data? This is what we sought to answer and what we are putting together in the next couple of charts.
This bar chart in green, gray, and red, counts the number of primary funding rounds in each quarter that we're up flat or down. And overlaid in the line chart is the total dollars raised in the periods.
There's a few things I find interesting here. One, you can see just how active the primary market was in 2020 and 2021 relative to the subsequent years. Two, you can also see that while funding is down materially in 2022 and 2023, it's not entirely dried up. Companies are still raising. And three, as we'd intuitively expect, down and flat rounds are increasing as a percentage of total rounds. More companies are having to raise capital at less attractive terms.
That is a fact. But number four, the majority of companies are still raising an up round. This says that the majority of companies raising new primary rounds are doing it from a position of strength. Those raising from a position of weakness are increasing, but they're still in the minority.
And this leads to the next chart that I find really interesting, which corroborates this story.
This chart shows, for each company raising a new round, on average, how many months it's been since their prior funding round.
What we see here is that the time between rounds has increased from lows in 2021, where companies on average were raising capital only a year after their prior round, to highs of a little over one and a half years, on average between rounds and currently trending up. To me, this hints that companies probably raised capital a bit more opportunistically in 2021 when valuations in multiples were strong. And probably helps explain why we have yet to see a large number of companies raising capital under tighter conditions, doing those down and flat rounds.
These companies, on average, just had done a round or two shortly before the current market downturn and so they probably still have cash. And therefore, I think this suggests companies are still waiting for attractive terms, have enough cash for now and are seeking to grow into their valuations if they can before they need to raise again. Companies on average do not appear desperate.
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