No question that 2023 was a difficult year for the business and technology ecosystem. Carta revealed a dramatic decrease in funding rounds and total investments, showing the total number of rounds Down 64% Q1 2023 and total dollars invested are down 86% from the peak in Q4 2021. Forum Ventures has seen firsthand how difficult the fundraising environment is for founders at all stages of this market, having invested in 100 + B2B SaaS companies this year across the accelerator and capital base. Michael Cardamone, CEO and Managing Partner of Forum Ventures, spoke to emerging managers about the state of this market and opined that “it’s the hardest to raise capital in a long time.”
In a recent report, Forum Ventures surveyed 70 funds and analyzed data from 167 seed and startup closed rounds between January and October 2023 to provide a comprehensive overview of the current state of the early-stage B2B SaaS investment landscape.
Some key findings from this report:
- 75% of respondents saw a decline in valuations from 2022 and the data in these rounds showed a 10% decline from the same survey conducted last year.
- Average valuations in pre-seed were $9 million post and this was true for pre-revenues up to $250,000 in ARR (annual recurring revenue) across all rounds data collected.
- Companies with $250,000 in ARR or higher raised an average valuation cap of $15 million.
Round seeds
As a founder, be smart about managing your cash flow, get great people to join your company, and focus on building a product that your customers crave.
Seed valuations have remained stable through 2022 and 2023, however achieving the necessary traction for these rounds has become more difficult, which can create false expectations for founders. In 2020–2021, it was relatively common for $3 million to $5 million seed rounds to be raised with very little, if any, traction, and typically occurred at valuations of $12 million to $25 million, depending on the venue and founders ‘ History.
There are exceptions, but today’s market requires substantial early traction, where companies typically need $250,000 to $1M in ARR to raise a $3M+ round, and these rounds typically come with about 20% to 25% dilution (ie, $3 million on a $12 million to $15 million post or $4 million on a $16 to $20 million post). The bar is much higher to raise an institutional round and a founder/company often needs to prove much more in today’s market than in the past. This dynamic means that many founders must first raise a pre-seed round to reach these milestones and therefore raise multiple rounds to reach a Series A.
