Aumni, a J.P. Morgan company, have published a new first half 2023 venture report, showing the status of the private capital markets.
Key highlights from the US include:
- Deals are down: Deals witnessed a significant decline, dropping by 40% in the first half of 2023 compared to H2 2022 and plummeting by 85% from the peak observed in H1 2021.
- Less capital deployed: Total capital raised also experienced a decrease of 24% in the first six months of 2023 compared to the previous half-year.
- Valuation decrease: Post-money valuations decreased between 22-37% across different stages over the past 12 months, indicating a challenging investment landscape.
- Down rounds are up: Down rounds surged to 21.6% of all rounds in 2Q, marking a 173% quarter-on-quarter increase and more than a threefold rise year-on-year, even as late-stage lead investor check sizes showed a mild recovery.
- Liquidations preferences on a comeback: In 2022, worsening market conditions led investors to prefer stronger liquidation preferences, but this trend relaxed in the first half of 2023. Seniority shares structures declined significantly by Q4 2022, accounting for 73.1% in early-stage financings and 51.3% in late-stage financings. Investors leaned toward customized preference stacks during this period. However, a resurgence of seniority shares structures in 2023 suggests a potential shift back to more liquidation preferences.
- Convertible loan terms are becoming more investor friendly: In Q2 2023, early-stage SAFE and convertible note investments rose by 66% year-on-year, showing increased interest in pre-seed rounds. However, rising interest rates on convertible notes were observed, likely due to tightening monetary policies. Notes with discounts of 21-50% rose by 74%, and those with over 50% discounts doubled year-over-year. By Q3 2023, median convertible notes interest rates have risen to above 10%, spiked by a 33% increase quarter-over-quarter, indicating ongoing market fluctuations.
Read the full report here.
