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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The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge Global, Inc., Forge Securities LLC or any of its affiliates (collectively, "Forge") to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s) and purchase agreement and will be subject to the terms and conditions and risks delivered in such documents.
To the extent information about or defining specific terms is provided herein, Forge makes no representations as to its accuracy and has no duty to update such information. Such information is based on Forge’s experience and the meanings and connotations of terms as Forge typically uses and interprets them. Others may construe such terms differently, and you should do your own research and consult with financial, legal and tax professionals regarding any such concepts included herein.
This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities LLC do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities LLC, member FINRA/SIPC.
Forge Securities LLC is a wholly owned subsidiary of Forge Global, Inc. Certain affiliates may act as principals in such transactions. Forge Data LLC is an affiliate of Forge Global, Inc. and Forge Securities LLC.
Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment. Past performance Is not indicative of future results.
Please Read These Important Legal Notices & Disclosures
The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge Global, Inc., Forge Securities LLC or any of its affiliates (collectively, "Forge") to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s) and purchase agreement and will be subject to the terms and conditions and risks delivered in such documents.
To the extent information about or defining specific terms is provided herein, Forge makes no representations as to its accuracy and has no duty to update such information. Such information is based on Forge’s experience and the meanings and connotations of terms as Forge typically uses and interprets them. Others may construe such terms differently, and you should do your own research and consult with financial, legal and tax professionals regarding any such concepts included herein.
This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities LLC do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities LLC, member FINRA/SIPC.
Forge Securities LLC is a wholly owned subsidiary of Forge Global, Inc. Certain affiliates may act as principals in such transactions. Forge Data LLC is an affiliate of Forge Global, Inc. and Forge Securities LLC.
Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment. Past performance Is not indicative of future results.