Last week we broke down how long startups wait to raise a repeat round through the online private markets. Startups need quite a bit of capital to get off the ground, and this frequently comes from multiple raises. But how do valuations change between these subsequent raises? For this Chart of the Week, we dig into valuation using data from companies that raised subsequent rounds through the online private markets. Specifically, we broke down by quarter whether a repeat raise was an up round (meaning the valuation increased), a down round (valuation decreased), or if the valuation stayed the same. Like last week, we examined 287 Regulation Crowdfunding and Regulation A deals that are currently active or closed between January 2018 and September 2021.
It is exciting to see that overall there is a steep upward trajectory of companies that return to the online private markets. Additionally — with the exception of the first quarter of 2018 — up rounds consist of the majority of repeat raises each quarter. Overall, nearly 75% of repeat raises were up rounds. Increased valuations are usually a sign of growth — more revenue, product development, new partnerships, etc. The fact that such a strong majority of subsequent funding rounds were up rounds indicates that many startups are successfully building and expanding as they receive online investments.
Only 10% of companies that pursued repeat raises saw their valuations decrease. And around 14% pursued subsequent funding while keeping their valuation at the same amount. Additionally, there was a strong jump in the number of repeat raises at the beginning of 2020, and that trend seems to be continuing. This activity is another sign of how online equity crowdfunding continues to grow. In traditional venture capital, it is normal for a startup to pursue anywhere from four to six funding rounds as it develops its product and grows operations. Seeing many companies return to the online private markets for their continued funding needs indicates that online startup investing is a viable alternative — or complement — to venture capital.
Note: all data used for the Chart of the Week comes from the KingsCrowd database and represents a snapshot of the crowdfunding market.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
About: Olivia Strobl
Olivia comes to KingsCrowd with a background in venture capital and technology. She spent time at Glasswing Ventures, an AI-focused venture fund in Boston, before joining the KingsCrowd team. There she helped develop machine learning algorithms for the opportunity qualification of preseed and seed-stage startup companies. Prior to her time at Glasswing, Olivia worked in a lab studying the neural correlates of attention. She holds a degree in Neuroscience from Wellesley College.