Investor insight from Octopus Ventures

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Ed, tell us your thoughts on fundraising in 2023…

A lot has changed since February 2022. It was roughly a year back we were hearing rumblings of a fall in valuations and concerns the market had become over-inflated. But we weren’t seeing that on the ground – the best deals continued to be very competitive.

By the autumn last year, the war in Ukraine had begun,  inflation started to rise and the cost-of-living crisis reared its head. Valuations started to come down rapidly.

Meanwhile, companies were looking to make themselves more capital efficient, often stretching their fundraising requirements in a more bearish market. As we come into the new year, we’ve started to see an uptick in companies looking for funding but at what could be said to be more sensible valuations compared to 2020/21.

Founders now need to be more realistic about what valuation they can raise at, and there is a premium on those businesses that can demonstrate capital efficiency.

It might be a hard fundraising environment for the next few years – so it’s worth companies ensuring that whatever they raise can give them plenty of runway.

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