Investors Drive Hard Bargains in Private Tech

Source: PitchBook; The Information Research

If you’re looking for proof that the private tech market has chilled, consider this. The number of highly valued private tech firms raising new rounds of financing dropped by 63% to 11 in the first quarter. And average valuations in fundraisings grew only 35%, down sharply from 152% averaged in the fourth quarter.

Fundraisings that were done since the end of last year also came at a cost of tougher terms. Twenty-six percent of companies that raised money in the fourth and first quarters agreed to protect investors from losing money in any subsequent public offering, up from 19% in the three quarters before that.

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“Right now companies that can’t get good terms can delay hoping the situation improves, or that they can hit a valuable milestone, but eventually they either get profitable or have to raise money even if they don’t like the terms,” he said. “But that might take a few quarters of few deals to play out.”

John Danner commented on this article.
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“Investors can (now) negotiate on price more than terms.”