As part of our recent "What's New" virtual series, I took a closer look at emerging company capital raising and how the industry has been impacted in the last year. The key trends that have emerged:
There have been wide sectoral and geographic differences in emerging company fundraising over the last few months. Fault lines in certain sectors have widened, impacting fundraising, while others, notably retailtech, health care, and foodtech, have remained bullish.
Valuations, especially in later rounds of financing, have remained buoyant. Valuations in early-stage investments are being more vigorously negotiated. After an initial flurry of emergency fundraising from existing investors and founders, terms of emerging fundraising have settled down to pre-pandemic terms, both on notes/SAFEs, as well as for preferred stock offerings.
The big changes have been in the landscape for exits. SPACs and secondary sales have emerged as alternates to IPOs and sales to strategic and private equity purchasers. Without directly impacting the terms of early-stage fundraising, the emergence of alternate forms of exit has impacted the lens through which founders and early-stage investors view the cap table and dilution aspects of the subsequent rounds of financing.