Moore points out that some sectors, like e-commerce, are likely to face more markdowns than others. Among the companies with markdowns greater than $150 million, Flipboard saw the largest percentage decline, falling 92% from a previous round, according to PitchBook data.įollowing Flipboard, the companies that saw the biggest percentage declines in down rounds were Klarna (down 87%) and Cowboy, a maker of electric bicycles (down 66%), PitchBook said.
The next largest drop in dollar terms came from social news aggregator Flipboard, which saw its post-valuation fall by $825 million when it raised $25 million early this month. The buy-now-pay-later model that propelled the company’s earlier growth has seen some of its allure diminish as competition has heated up in the sector, while inflation and rising interest rates have raised questions about sustaining further growth. Klarna saw the most dramatic down round, tumbling from a $45.6 billion valuation to a $6.7 billion valuation when it raised $800 million on July 11. To take a closer look at this trend, Fortune asked Pitchbook to provide data on 2022’s largest down rounds.
“Now, deployment across the board has slowed and the IPO markets have closed, making it more difficult for companies to access funding.” “So much of the past decade has been defined by exuberance, and now we’re at the end of a cycle,” says Mathias Schilling, co-founder of San Francisco-based VC firm Headline and a veteran of the dot-com bust. But what’s had an even bigger impact on these recent markdowns is the inevitable adjustment to frothy valuations during the banner year for venture financing in 2021.Įven back in January, when some startups were valued at more than 100 times their annual revenue, one VC told PitchBook she “would welcome a decline in valuations because things seem much more exuberant than they ever have.” Anyone sharing that sentiment has gotten their wish: The FOMO dynamic driving funding last year is passing, paving the way to a return to rationality. Moore says that the economic and geopolitical headwinds like inflation, war in Ukraine, and a contracting economy have prompted the slowdown and are unlikely to abate soon. “But yes, it was a meaningful drop and bucked the trend of the last six to eight quarters.” “It might not have been as precipitous a drop as people were expecting given all the doom and gloom,” Conor Moore, national leader of U.S. Globally, venture financing last quarter fell 38% to $120 billion from the first quarter. totaled $62.3 billion in the second quarter, down 24% from the first quarter and 34% below the record in the final quarter of 2021, according to a recent report from KPMG.
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