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In 2023, Even Big Startup Exits Come With Markdowns

Illustration of an Exit sign next to a pile of coins.

Generally speaking, when a startup gets acquired by a big company or goes public at a valuation over a billion dollars, prior backers at all stages come out ahead.

This year, however, that often hasn’t been the case. Because private company valuations hit such frothy heights a couple years ago, even good-sized exits are commonly well below peak.

To illustrate, we used Crunchbase data to assemble a list of the largest acquisitions and public offerings of venture-backed companies this year as well as larger IPOs. We then pulled out examples of multiple cases where exit valuations were well below peak, charted below

Small to moderate markdowns

The discounts to peak pricing aren’t always vast. Marketing automation provider Klaviyo, for instance, went public at a valuation only a couple percentage points below its boom-era high.

A more middle-of-the-road outcome was for Loom, a provider of video collaboration tools that sold to Atlassian for $975 million in October. While that looks like a large purchase by 2023 standards, Loom actually sold at a discount from a $1.5 billion peak valuation for its Series C in 2021.

There was a slightly larger discount from peak for Corvus Insurance’s $435 million sale to Travelers Insurance. Boston-based Corvus raised a $100 million Series C led by Insight Partners in March 2021 at a $750 million valuation.

Bigger discounts

Others saw larger drops.

Probably the best-known case in point is Instacart. The grocery delivery platform hit a peak valuation of $39 billion as a private company, but reduced that number on multiple occasions as it prepped for a public offering under less giddy market conditions.

By the time it actually did IPO in September, the company went out with an initial valuation of $8.3 billion. Since then, it’s sunk to around $6.6 billion.

Another once-vaunted unicorn, digital mortgage provider, saw an even steeper valuation drop as the climate turned and refinance activity on its platform shriveled in the wake of interest rate hikes.

After hitting a roughly $4 billion valuation in 2020, the company prepped to go public via a SPAC merger in 2021 at a $7.7 billion value. In August, when Better finally did make it to market, it was worth a tiny fraction of that sum. Since then, it’s sunk further, with a recent market cap around $360 million.

Still, there were big wins too

Despite the breadth of post-peak markdowns, we have seen some exits that look strong for investors at all stages.

Among these is game developer Scopely, acquired by Savvy Gaming Group for $4.9 billion in April in what ranks as the largest deal of the year.

Versanis Bio, a developer of obesity drugs that Eli Lilly agreed to acquire in July for up to $1.93 billion, looks like another big win. It’s a big number considering that Oakland, California-based Versanis was only founded in 2021. That year, the company raised its only known venture round, a $70 million Series A led  by Atlas Venture and Medicxi.

Backers of generative AI startup MosaicML also came out ahead after Databricks signed a definitive agreement in June to acquire the company for $1.3 billion. Previously, San Francisco-based MosaicML had reportedly raised $64 million since launching in 2021.

Can’t always get what you want

Overall, the exit numbers aren’t too surprising given the current market climate. Venture investment is down sharply from 2021 and 2022 levels, and startup valuations are broadly lower as well.

Of course, there will always be hot companies and hot sectors, like generative AI and obesity therapeutics, where large and lucrative exits still happen.

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Illustration: Dom Guzman

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