Without a doubt 2023 has been a tough year for the venture and technology ecosystem. Carta revealed a significant decrease in financing rounds and total investment, explaining the total number of rounds in it The first quarter of 2023 decreases by 64% Total dollars invested are down 86% from their peak in Q4 2021. Forum Ventures has seen first-hand how challenging the fundraising environment is for founders at all stages of this market, having invested in more than 100 B2B SaaS companies this year via its accelerators and seeds funds. Michael Cardamone, CEO and Managing Partner at Forum Ventures, spoke to emerging managers about the state of this market and opined that “this is the toughest fundraising I have faced in a long time.”
in recent report, Forum Ventures surveyed 70 funds and analyzed data from 167 closed seed and seed 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 indicated a decline in ratings since 2022 and data across these rounds showed a 10% decline from the same survey conducted last year.
- Average pre-seed valuations were $9M, and this applies to pre-seed revenues of $250,000 in ARR (Annual Recurring Revenue) across round data collected from them.
- Companies with $250,000 in ARR or higher were raised at an average valuation cap of $15 million.
Seed rounds
As a founder, get smart about managing your cash flow, convince great people to join your company, and focus on building a product your customers crave.
Seed valuations have remained steady through 2022 and 2023, but achieving the necessary momentum for these rounds is becoming more difficult, which can create asymmetric expectations for founders. In 2020-2021, it was relatively common for $3M to $5M seed rounds to be executed with very little, if any, traction, and they were typically executed at valuations of $12M to $25M, depending on the space and founders. ‘ background.
There are exceptions, but today’s market requires significant early traction as companies typically need $250,000 to $1M in ARR to raise a $3M+ seed round and these rounds are typically done at approximately 20% to 25% dilution (e.g., 3 $12 million at $12) $1 million to $15 million or $4 million at $16 million to $20 million. The challenge is much higher to raise an institutional seed round, and the founder/company often needs to prove a lot more in today’s market than they used to. This dynamic means that many founders must first raise a pre-seed round to reach these milestones, and subsequently raise multiple rounds to reach Series A.