VC Valuations Q1 2018

Venture capital valuations continue to move higher across all stages. The most significant increase was at the late stage, where the median pre-money valuation as of 1Q 2018 pushed to $75 million, a 19% increase from 2017.
The median time between VC rounds remains extended, sitting at 1.4 years for angel & seed and early-stage rounds and 1.8 years for late-stage, compared to long-term averages of 1.2 and 1.5 years, respectively. Extended hold times have caused some apprehension in the VC community; however, VCs appear willing to continue funding companies for prolonged periods in private markets.
While we continue to see valuation increases across all stages, this is not driven by an increase in investor protections and terms. For example, the percentage of deals with cumulative dividends, as well as those with participation rights, fell steadily over the past decade and hover at or near prior lows so far in 2018.
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Valuation stage late stage round angel seed early stage Source PitchBook Company 2Q 3Q 4Q 3Q 4Q 1Q 1Q 2Q 3Q median VC Valuation report Deal Pre money Valuation 4Q 1Q 2Q Pre seed investor angel seed round Valuation Step ups year
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
VC  
Valuations
1Q 2018
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Contents
Key Takeaways
3
Overview
4
Spotlight: Pre-seed Valuations
7
Valuation Step-ups
9
Spotlight: Exit Valuation Step-ups
10
Corporate VC Valuations
11
Deal Terms
12
Credits & Contact
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Content
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methodologies.
Key takeaways from the analysts
• Venture capital valuations continue 
to move higher across all stages. The 
most significant increase was at the 
late stage, where the median pre-
money valuation as of 1Q 2018 pushed 
to $75 million, a 19% increase from 
2017.
• The median time between VC rounds 
remains extended, sitting at 1.4 years 
for angel & seed and early-stage rounds 
and 1.8 years for late-stage, compared to 
long-term averages of 1.2 and 1.5 years, 
respectively. Extended hold times have 
caused some apprehension in the VC 
community; however, VCs appear willing 
to continue funding companies for 
prolonged periods in private markets.
• While we continue to see valuation 
increases across all stages, this is 
not driven by an increase in investor 
protections. For example, the 
percentage of deals with cumulative 
dividends, as well as those with 
participation rights, fell steadily over the 
past decade and hover at or near prior 
lows so far in 2018.
19% increase 
in late-stage median pre-
money valuations since 2017
1.4 & 1.8 
years between rounds for 
angel & seed to early-stage & 
late-stage, respectively
5% of deals 
in 1Q 2018 had cumulative 
dividends
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
Sponsored by
0
2,000
4,000
6,000
8,000
10,000
12,000
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Deal value ($B)
# of deals closed
Angel/seed
Early-stage VC
Late-stage VC
Source: PitchBook 
*As of March 31, 2018
While valuations have risen in recent years, fears of 
declining capital invested haven’t manifested 
US VC activity
VC valuations trend higher in 2018 
Overview
Following a decade high of VC 
invested in 2017—and on a record 
pace again in 2018—VC valuations 
continue to move higher across all 
stages. The most significant increase 
was at the late stage, where median 
pre-money valuations as of 1Q 2018 
pushed to $75 million, a 19% increase 
from 2017. We believe much of this 
valuation expansion has been caused 
by the buildup of dry powder and 
general availability of capital to high-
growth companies, which has given 
these companies pricing power in 
negotiations with investors.
This phenomenon is transforming 
the VC environment and contributed 
heavily to the solidification of support 
for mega-deals, which we categorize 
as deals over $100 million. Historically, 
companies seeking equity financing 
of this size would turn to the public 
markets to continue funding their 
growth, but the size and maturity 
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
4 
Sponsored by
5 
Source: PitchBook 
*As of March 31, 2018
Source: PitchBook 
*As of March 31, 2018
$6.3
$6.5
$20.0
$27.5
$63.3
$75.0
$0
$10
$20
$30
$40
$50
$60
$70
$80
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Angel/Seed
Early-stage VC
Late-stage VC
Late-stage valuations continue to soar 
Median pre-money valuation ($M) by stage
22.2%
26.7%
26.7%
26.5%
23.5%
22.8%
16.7%
20.0%
12.5%
15.5%
0%
5%
10%
15%
20%
25%
30%
35%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017 2018*
Angel/Seed
Series A
Series B
Series C
Series D+
Percentage acquired in angel & seed eclipses early-stage 
Median percentage acquired by series
of the VC ecosystem now allows 
companies to scale with VC backing. 
Traditional VC firms raising $1 billion+ 
funds and increased activity by 
SoftBank’s Vision Fund make these 
mega-deals possible.
With older and more mature 
businesses raising a greater number 
of VC rounds, it is logical that 
valuations rose in tandem. This 
development also lengthened average 
hold times for venture investments, so 
not only is there more risk of a down 
exit from an elevated valuation, but 
time-weighted returns may also come 
under pressure as companies sit in 
fund portfolios longer. 
The shift toward funding more mature 
companies was especially present 
in the angel & seed stage, where the 
median age for companies receiving 
financing pushed to three years—
twice as old as a decade ago. This 
trend is explained by a multiplicity 
of alternative funding options, such 
as accelerators, equity or product 
crowdfunding and a greater ability 
to bootstrap thanks to tech-enabled, 
low-capital-intensity business models.
As valuations and deal sizes at the 
angel & seed stage steadily grew 
larger over the last 10 years, investors 
in these transactions consistently 
took a 20% ownership position. But 
so far in 2018, the median percentage 
acquired has spiked to a decade high 
of 26.7%. This is an intriguing change, 
as large seed financings now come 
with the trade-off of giving up more 
equity. We see this shift as evidence 
that companies are now being more 
fully valued at the angel & seed 
stage, with investors tempering their 
expectations for unchecked valuation 
growth going forward.
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
Overview
Sponsored by
6 
Growth at all costs?
In recent years, attractively priced 
companies with strong growth 
potential have been difficult to find—
even in public equity markets—because 
quantitative easing raised valuations 
across almost all asset classes by 
decreasing the cost of leverage 
and injecting cash into the market. 
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
1.5
1.4
1.4
1.5
1.8
1.8
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Angel/Seed
Early-stage VC
Late-stage VC
While the backdrop is changing, 
growth remains highly sought-after, 
which was another force behind the 
extended climb in VC valuations. Over 
this decade-long bull market, VC 
investments offered the ability to back 
high-growth companies, attracting 
greater demand from capital allocators, 
as evidenced in our fundraising data. 
However, investors are also paying 
up for growth outside of the private 
markets, as forward price to earnings 
ratio of the S&P 500 growth versus 
value moved to 1.37x—the widest gap 
since 2008. 
Driven by bigger deals at larger 
valuations, the median time between 
VC rounds remains extended, sitting 
at 1.4 years for angel & seed, 1.5 years 
for early stage and 1.8 years for late 
stage, compared to long-term averages 
of 1.2, 1.2 and 1.5 years, respectively. It 
is logical that cash runways extended 
following the run-up in valuations 
over the last five years and, more 
importantly, the parallel move in 
deal sizes. Extended hold times have 
caused some apprehension in the 
VC community, where the balance 
of power seems to have shifted to 
founders and startups. Nonetheless, 
VCs appear willing to continue funding 
companies for prolonged periods in 
private markets. Of course, GPs still 
operate funds with defined timelines 
and need to return capital to LPs. To 
that end, some large VCs are even 
raising separate vehicles to support 
follow-on rounds for successful 
portfolio companies, as the largest 
companies start to outgrow original 
funds.  
Cash runways remain extended 
Median time (years) between rounds
Source: PitchBook 
*As of March 31, 2018
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Overview
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The origin of rising late-stage 
valuations is the sustained growth in 
both deal size and valuations of angel 
& seed rounds. Investors and founders 
have noted that the upward shift in the 
venture life cycle pushed angel & seed 
financings to more closely resemble 
historical early-stage financings, 
remarking that “seed is the new 
Series A.” The data corroborates this 
sentiment. Median age at time of angel 
& seed rounds reached three years in 
2018—surpassing the maturity level 
of companies securing early-stage 
rounds in 2012. Median seed-round size 
reached $2.0 million in 2018, edging 
closer to 2012’s median Series A size 
of $2.7 million. Startups are also raising 
more rounds before their first early-
stage VC round (Series A or B). 
The phenomenon of seed rounds 
shifting to companies that in the recent 
past would have received early-stage 
financings appears to have led to a 
stage of funding that some investors 
are referring to as “pre-seed.” As one 
might infer, pre-seed is the stage of 
funding that precedes angel & seed 
rounds. Some define this stage of 
financing as either the first institutional 
capital investment received by a 
startup or simply as investment rounds 
less than $1 million. 
Using this working definition, we 
analyzed the subset of rounds less than 
$1 million to determine if they resemble 
size and valuation of historical seed 
rounds—or put simply, to see if “pre-
seed is the new seed.” 
$0
$1
$2
$3
$4
$5
$6
$7
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2012
2013
2014
2015
2016
2017
2018
Angel & seed valuations steadily climb to record highs  
Median angel & seed pre-money valuation ($M)
Source: PitchBook
Spotlight: Pre-seed Valuations
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
Median seed deal size edges closer to historical Series A 
Median deal size ($M) by deal type
Source: PitchBook 
*As of March 31, 2018
$0.5
$0.8
$1.6
$2.0
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Angel
Seed
Sponsored by
8 
Indeed, pre-seed valuations at year-
end of 2017 and 1Q 2018 were $4.0 
million and $3.4 million, respectively. 
These metrics closely resemble angel 
& seed valuations from 2012 and 
2013 ($4.0 million and $4.5 million, 
respectively). It appears that pre-seed 
rounds are more founder-friendly, with 
median equity acquired in 2017 sitting 
at just 12.4% compared to 22.2% in all 
angel & seed rounds. 
The data also suggests that larger 
angel & seed rounds ($1 million 
or greater) command a greater 
percentage of equity, with median 
percentage of equity acquired sitting 
at 25.0% in 2017, a value significantly 
higher than that of pre-seed rounds. 
Because recent angel & seed rounds 
more closely resemble historical 
early-stage rounds, it appears they 
are pulling the percentage of equity 
acquired upward. The key takeaway 
for startups is that, even though the 
bar has risen for companies seeking 
seed financings, some investors are still 
cutting checks at historically smaller 
seed sizes and valuations. Though 
the concept of pre-seed rounds is 
still being solidified, it provides us 
a glimpse of valuations in financing 
rounds of very early-stage startups and 
illustrates the emergence of a stage 
resembling what seed financings used 
to be historically.
‘Pre-seed’ valuations similar to 2013 angel & seed metrics 
Median pre-money valuation ($M) for rounds less than $1M
Source: PitchBook 
*As of March 31, 2018
$4.00
$3.40
$0
$1
$2
$3
$4
$5
2010
2011
2012
2013
2014
2015
2016
2017
2018*
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
Startups raising additional rounds before early-stage VC 
Average number of rounds raised prior to first early-stage deal
2.1
2.0
0.0
0.5
1.0
1.5
2.0
2.5
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Source: PitchBook 
*As of March 31, 2018
Larger rounds command greater percentages 
Equity acquired (%) in pre-seed vs. larger angel & seed rounds
25.0%
27.5%
12.4%
14.3%
0%
5%
10%
15%
20%
25%
30%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Angel/Seed rounds greater than $1M
Pre-seed rounds
Source: PitchBook 
*As of March 31, 2018
Spotlight: Pre-seed Valuations
Sponsored by
9 
Data from the beginning of the year 
suggests that the median valuation 
step-up between VC rounds increased 
to 1.6x in the first quarter. This is 
the greatest increase we’ve seen in 
recent years by a significant margin, 
as median step-up over each of the 
last three years settled into the 1.4x to 
1.5x range. Median valuation step-up of 
early-stage rounds reached a decade 
high of 1.9x in the first quarter of 2018. 
Given that equity acquired in early-
stage financings remained relatively 
unchanged, it appears that founders 
were able to negotiate significantly 
larger financings and valuations 
without giving up more equity. 
We’ve seen a similar story in late-stage 
financings, but to a lesser degree. 
While late-stage rounds are also larger 
than ever, a minor uptick in equity 
acquired suggests mature startups 
may be giving up slightly more in 
exchange for higher valuations. 
1.52x 1.61x
2.23x
2.04x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2013
2014
2015
2016
2017
2018
Median
Average
Valuations continue upward momentum 
Valuation step-ups between pre-money & post-money across all rounds
Source: PitchBook
Upward movement in valuations of 
late-stage rounds is widespread so 
far in 2018, with only 4% of late-stage 
down rounds recorded in the first 
quarter, compared to 10% in the two 
preceding years. 
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
Valuation Step-ups
1.7x
1.9x
1.3x
1.4x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Early-stage VC
Late-stage VC
Source: PitchBook 
*As of March 31, 2018
Source: PitchBook 
*As of March 31, 2018
Early-stage step-ups reach record high  
Median valuation step-ups
Down rounds remain scarce 
Up, flat & down rounds
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Down
Flat
Up
Sponsored by
10 
1.5x
1.3x
1.5x
1.9x
0x
1x
2x
3x
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Late-stage VC
Early-stage VC
Median valuation step-up at exit climbs in 2018 to date 
Median step-up from last VC round valuation to exit
1.5x
1.7x
0x
1x
2x
3x
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Late-stage valuation step-ups at exit fall to lowest level 
since 2009  
Median step-up from last VC round valuation to exit by stage
Source: PitchBook 
*As of March 31, 2018
Source: PitchBook 
*As of March 31, 2018
The significant valuation expansion 
over the past few years has surfaced 
worries that companies won’t be 
able to maintain these lofty private 
valuations at exit. This is most critical 
at the top end of the VC market where 
we’ve seen the greatest percentage 
rise in median valuations. The data has 
started to show signs of late-stage 
valuations becoming inflated relative 
to the public markets, as the median 
late-stage valuation step-up at exit fell 
to 1.3x through 1Q 2018—the lowest 
value we’ve recorded since 2009. 
So, while most late-stage companies 
are exiting above their last private 
valuation, the number failing to meet 
that benchmark is growing. 
Extended hold times brought on by 
capital availability and the JOBS Act’s 
elimination of the “500 Investor Rule” 
have changed investor economics at 
the late stage. Smaller valuation step-
ups at exit put more pressure on the 
investors writing checks at the latest 
rounds and who are already taking on 
the risk of larger deal sizes. We expect 
to see buyers of VC-backed companies 
(strategic acquirers, PE firms and 
public market investors) become more 
selective or stringent in regard to 
operating benchmarks as the current 
business cycle matures, which should 
drive further compression of the step-
up multiple.
Spotlight: Exit Valuation Step-ups
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
Sponsored by
11 
Rounds with CVC participation have 
consistently carried higher valuations 
than those without. But as valuations of 
early-stage rounds reached new highs 
in 1Q 2018, the difference between the 
two appears to be converging. With 
CVC-backed round valuations only 
11% greater than those without CVC 
backing, this is the smallest spread 
we’ve seen since 2009. The surplus 
of dry powder has provided non-CVC 
investors with ample resources to 
compete for higher valued companies 
at the early stage, providing larger 
checks that result in larger valuations. 
Early-stage CVC investments in the 
first quarter continued to tap into 
emerging technologies, such as 
robotics, VR and blockchain. The 
trend toward larger early-stage 
round sizes and subsequently larger 
valuations may be an indication that 
these strategic investors are willing 
to provide ample funding at premium 
prices to further develop desirable 
technologies that will advance their 
businesses. Blackmore Sensors and 
Analytics, for instance, received an 
$18 million financing (at a $68 million 
valuation) to advance its LiDAR 
sensor technology. Strategic funders 
in the deal included BMW i Ventures 
and Toyota AI Ventures, whose 
autonomous vehicle efforts could 
benefit from the production of cost-
effective LiDAR sensors. 
Conversely, the median pre-money 
valuation of late-stage rounds with 
CVC investors pulled dramatically 
ahead of those without CVC funding. In 
1Q, 38% of deals with CVC participation 
were larger than $25 million, compared 
to a five-year average of just 24%. 
Given this statistic, it follows that 
late-stage valuations reached a record 
high of $135 million in the first quarter. 
Early-stage CVC & non-CVC valuations converge in 2018 
Median pre-money valuation ($M) 
Late-stage CVC rounds pull dramatically ahead of non-
CVC rounds 
Median late-stage pre-money valuation ($M)
$25.2
$30.0
$19.0
$27.0
$0
$5
$10
$15
$20
$25
$30
$35
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017 2018*
CVC investor
No CVC investor
$100.0
$135.0
$46.3
$56.6
$0
$20
$40
$60
$80
$100
$120
$140
$160
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017 2018*
CVC investor
No CVC investor
Source: PitchBook 
*As of March 31, 2018
Source: PitchBook 
*As of March 31, 2018
The strategy of CVC participation in 
late-stage deals appears to focus on 
investments in more mature companies 
(that may not fit as strongly into 
strategic objectives) with lower risk 
profiles, such as Lyft and DoorDash. 
SoftBank Group also plays a role here, 
single-handedly elevating valuations 
with large allocations to seven late-
stage companies in 1Q alone. 
Corporate VC Valuations
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
Sponsored by
12 
Negotiated deal terms and investor 
rights play a key role in the ultimate 
valuation figure. By increasing 
the number of investor rights or 
sweetening the payout, investors 
are more willing to accept a higher 
valuation. Both the stigma and the 
economic reality of raising a down 
round remain strong deterrents for 
VC-backed companies, and adding 
investor-friendly terms can sometimes 
prevent this outcome. The adage that 
“you can pick the valuation you want, 
but I’ll pick the terms” still holds true, 
but it seems this has become less of an 
issue with company growth potential 
justifying high valuations without 
excessive protections.
Looking at the data, it seems that the 
more “founder-friendly” sentiment 
commonly mentioned in the media 
seems to hold true. Inclusion of 
liquidation participation continued 
its steady decline, reaching 18.6% of 
deals in 1Q 2018, a far cry from the 
55.5% levels we recorded a decade 
ago. A similar linear downtrend is 
evident in the percentage of deals 
with a cumulative dividend provision, 
which is a way for VCs to secure 
returns not linked purely to equity 
valuation growth. Overall, it seems the 
confidence in the portfolio companies 
and bargaining power for founders 
remains high, as investors have not 
had to resort to increased rights or 
protections thus far in 2018.
20.5%
18.6%
0%
10%
20%
30%
40%
50%
60%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017 2018*
Deals with participation rights continue to decline 
Percentage of deals with participation rights
Source: PitchBook 
*As of March 31, 2018
Cumulative dividends provisions included in only 5% of deals 
Percentage of deals with cumulative dividends
Source: PitchBook 
*As of March 31, 2018
PITCHBOOK 1Q 2018 VC VALUATIONS REPORT
Deal Terms
4.9%
5.3%
0%
2%
4%
6%
8%
10%
12%
2008 2009
2010
2011
2012
2013
2014
2015
2016
2017 2018*
Sponsored by
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