Venture capital down rounds — when a portfolio company in a new round of funding is valued below its prior funding round valuation — made up 8.6% of all deals worldwide in 2022, near a five-year high, Preqin reported in a new valuation report.
Between 2017 and 2022, down rounds accounted for 6.8% of venture capital funding transactions, Preqin said in the report released on Wednesday. In the first quarter of 2022, down rounds made up about 3% of venture capital deals.
In the fourth quarter alone, about 5% of newer start-up companies saw lower valuations in so-called Series A funding rounds, mainly referring to companies receiving their first venture capital investments, than the valuations of their earliest or seed stage funding rounds. Roughly 20% of older, later-stage Series C and D round companies had valuation declines in the fourth quarter, Preqin said.
Global buyout entry multiples, which is a the price paid compared to the companies earnings, slid by 13% to 11.9 times earnings before interest, tax, depreciation and amortization. Valuations of information technology companies, which accounted for 31% of all buyouts in 2022, fell to a median entry multiple of 15.5x at the end of the third quarter from 21.5x in the peak in mid-2021, Preqin said.