Looking at Where Valuations are Heading

December 7, 2021

Private equity data provider Pitchbook often produces some very interesting figures for gaining a broader view of the private equity and venture capital (VC) markets. Their most recent set of figures on the trends in VC valuations offer fascinating global view of recent trends.

Here are four charts looking at where VC valuations are heading.

Median Early-Stage Valuation Hits new High

The first view is median early-stage valuations from 2010 through the third quarter of 2021. The picture is almost too incredible to believe. The average pre-money valuation has ballooned from $19 million in 2010 to $138 million in 2021. Simply amazing.

On the median measure, the median pre-money valuation has gone from $8 million in 2010 to $53 million in 2021. Strong, but nowhere near as strong as the average. Unsurprisingly, the very successful valuations have been pushing up the average in recent years, and in recent years, the outlier effect has been quite large.

Overall, the average valuation has grown 626% while the median has grown by only 563%. Of course, both shown an investment return that is nothing to scoff at.

Source: Pitchbook

Massive Upticks in Early-Stage Valuation Multiples

The next figure looks at the incredible surge in early-stage valuation multiples. The most dramatic increase has been on the average, where the most recent estimate of 5.1x is much higher than the 2.1x of 2006. The average multiple was just 2.6x in 2020. Another simply amazing observation.

Source: Pitchbook

Late-stage valuations contract slightly in the third quarter of 2021

The third view looks at late-stage valuations in Q3 2021. Surprisingly, and in contrast to the early-stage valuation picture, late-stage valuations contracted slightly in the third quarter. The average late-stage valuation went from $782 million to $736 million, marking the second straight decline in the measure after peaking at $852 million in the Q1 2021.

The median valuation for late-stage companies saw a less pronounced decline, going from $125 million in Q2 to $115 million in Q3.

Source: Pitchbook

The biotech world is on the rise

Shifting to a view of an important industry, the early-stage biotech pre-money valuation estimates ballooned in 2021. The average pre-money biotech valuation has gone from $19 million in 2006 to $115 million in 2021, a growth of 505% over 15 years. Most investors would be more than pleased with these results.

Source: Pitchbook

Summing Up

Overall, the valuation picture for VC investments in recent years has become incredibly bright – some might say too bright. Life has been good for the early-stage investors in the past few years. Maybe 2022 offer a similar result without any popping.

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