So there’s something strange happening in venture capital today.  It’s roaring back.

But this time, it’s very specific.  VCs are mainly investing in:

  • AI deals
  • SaaS deals that are true outliers.  Triple Triple Double Double or Better.
  • Seed deals everywhere with strong teams or interesting products

Yes, everything else is kind of a venture wasteland.  And many have seen growth radically slow since 2021 — but not all.  Not the outliers.

And the outliers?  The thing is, they are being funded at very similar revenue multiples as 2021.  Even higher in AI.

Why is this a problem?  The problem is just that actually, in many cases, these rounds were cheaper in 2021.  Because public multiples were just so much higher.

Let’s flash back all the way to … early 2022 here:

Even in 2022, after the peak but before the full crash that came toward the end of the year, leaders were trading at 26x-27x ARR.  And importantly, growing at 50%+ a year.

Today?  Today the average public SaaS company per BVP is worth less than $2 Billion, trading at 7.6x and only growing .. 19.7%.

Multiples are down 50%-70% from the 2021 peak, and importantly, so is revenue growth.  It’s much, much tougher out there to scale and grow, and each dollar is worth far less in the public markets.

So why are startup valuations so sticky today?  Why are they in many cases, as high as 2021 — at least for the outliers.  At least for the best?

Honestly I am not sure.  Yes, the epic growth of OpenAI, nVidia, and more have fueled billions invested in AI.  Many of these deals will end in tears, but if it’s the next OpenAI, it can make sense.

But outside of that, it doesn’t make a ton of sense where valuations are today compared to almost any other year.  Yes, VCs always complain about prices.  But here, they’ve become sticky … even as revenue multiples are way down.  At least again, for the best ones. And that makes them the most expensive, ever.

It is what it is.  As founders, at least be aware it may make the next round harder than you expect.  Because when everything is priced to perfection, the margin for error is a lot tighter.


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