It seems that the The younger a startup is today, the better its fundraising prospects.
Recently data from Carta counters the narrative that 2023 has been tough on startups that aren’t building an AI product. In fact, grouping startups by maturity paints a very different picture.
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Early-stage startups are seeing stronger valuations and smaller declines in overall capital availability, welcome benefits in a year of mostly negative news. However, late-stage investment has fallen, and since this segment typically accounts for the most dollars, people have made the mistake of conflating a dramatic late-stage downturn with the general startup malaise.
We don’t mean to be silly. There are certainly many early-stage startups that struggle and late-stage startups that thrive. And Carta’s data is based on its customer base, which makes the information useful and indicative, but not complete.
However, the trends we can spy are an effective argument against the logic of startups who are encouraged to stay private as much as possible. For private-market investors looking to get the most out of their investment, baking startups in the oven until they’re fully ready worked for a while, but that method of running and scaling tech companies no longer seems so impressive.
Perhaps the early move to an IPO was the right idea all along. Let’s explore.
How much do startups cost today?
Analyzing data from Carta for the third quarter of 2023, it is clear that grouping startups by stage makes sense. For example, the seeding stage was considered to be immunity to decaybut there was only a 58% decrease in capital raised by startups in the third quarter of 2023 compared to the fourth quarter of 2021. Meanwhile, Series A, B and C rounds fell by 80% or more in value in the third quarter compared to Q4 2021.
