Jason M. Lemkin discusses down rounds in startup fundraising, contrasting catastrophic wipeouts (e.g., a company re-priced from $50M to $5M) with more common, moderate repricings and down IPOs (example: a firm IPO'ing at ~$6B after a 2021 private valuation of ~$10B). He notes many startups that raised at peak valuations are now raising at lower but reasonable valuations (e.g., 10x–20x).
There is disastrous ones. Recaps. You know, we did the last round at 50 valuation. We got nowhere. There's no revenue and we're wiping out everybody. And we're doing a new round at 5 million. Okay, that's a wipeout. That's terrible. I know some folks will do those investments. I won't. I've never seen those companies recover. There's a different scenario that is happening where just the last round was too high price red Reddit just IPO'd. They IPO'd at a $6 billion plus valuation, which is very impressive. But the, the crazy 2021 round was at 10 billion. So, yeah, it's a down round. It's a down IPO. We are seeing tons of startups that raised at 100x50x rounds at the peak, that now are raising rounds at good valuations. 10x15x maybe even 20x arrangements.
