While the drive for investing in late-stage companies is waning by the day, high-priced, early-stage start-ups continue to enjoy the patronage of mutual funds, corporate VCs, and other non conventional venture capital firms.
According to the PitchBook US VC Valuations Report, the median valuation of current participation of non traditional investors with early-stage companies in the US in the first half of the year notched an impressive $75 million. In Q2, the early stage median valuation experienced contractions. However at the first half of the year, there was a clear distinction, the highest recorded, in the median valuation of companies boasting of non traditional investor participation compared to those without this non traditional investors.
From all indications, the non traditional investors have distinguished themselves from other types of investors by the value they place on early stage start-ups.
One of the reasons for the identifiable dichotomy between these investors is the less sensitive disposition of the non traditional investors to market conditions. This disposition partly springs form the large size of non traditional venture firms unlike its counterparts.
Late stage investments are stalling, and the non traditional investors are taking the initiative to set an equilibrium on venture company investment listings by searching the B stage for viable companies. Apparently this decision beats amassing more late stage companies on their investment listings.
Records are showing that early-stage start-ups are now considered to be a wiser investment for most corporate venture capital firms than mutual funds. Over the years the enterprising relationship between early stage start-ups, and non traditional investors have deepened. The magnitude of transactions has also increased considerably, so early stage start-ups are receiving more substantial investment capital from their patrons.
The size of the conventional venture capital firms, and non traditional investors are completely different as the latter is larger in its size. The implication is that non traditional investors must invest much more substantial capital into the businesses they are financing. They also have the unique advantage in their ability to lead rounds which they judiciously use to upwardly pressure valuations.
Compared to what was obtainable in 2021, non-traditional investors are exercising more caution in their investment drive. They have however directed this caution more to the late stage companies these past few months, as early stage start-ups are currently receiving quality attention from non traditional investors.
When strategies are suddenly altered, a learning curve emerges. It will for instance take some serious adjustment for investors accustomed to public companies to appraise a business at an early stage because such an investor is more readily disposed to companies nearing an IPO.
As originally reported in (https://pitchbook.com/news/articles/early-stage-valuations-nontraditional-investors)