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Where valuations for tech companies stand now, in 3 charts

November 1, 2022, 11:06 AM UTC

For all the “end-of-the-world” talk we’ve been hearing for months, valuations really hadn’t come down that much—on paper, that is. 

That is starting to change.

New data released this morning from CB Insights showcases how the caution we’ve been hearing about in the market is very real and is seeping through the cracks into actual numbers. Median tech valuations were down across nearly every stage in the third quarter—to the tune of almost 29% compared to the second quarter of this year, per CB Insights. The impact has been most pronounced on late-stage deals, where the median valuation fell by 50% (womp womp). 

Venture capitalists continue to take fewer risks on the term sheet, negotiating stronger downside protection. Of the deals that closed this quarter, 13% of late-stage deals had capped or partial participation, meaning investors negotiated the right to not only get their investment back in the case of liquidation but also a cut of the remaining proceeds. That’s twice the number of deals in which investors negotiated those terms last calendar year.

In general, it’s worth remembering that the numbers are still strong, particularly when you look at the year-over-year figures. After all, the numbers only become official when there’s a formal funding event or exit. Deals are still getting done and, apart from some very-public instances, we haven’t seen many companies report a downround. But the market has slowed down in general, there are not as many deals getting to the finish line, and startups are turning to debt for new cash.

Here’s what we’ve learned from the last few months, in 3 charts:

Not-very-happy feet… Yesterday a federal judge shut down Penguin Random House’s attempted behemoth acquisition of competitor Simon & Schuster—a win for an aggressive Justice Department that hasn’t shied away from taking big swings this year. The deal would have given PRH control of nearly half of all top-selling titles, the department had argued, and would have harmed competition within the book industry. The three-week antitrust trial this summer had turned into a well-publicized exposé of the inner workings of a highly competitive, jargon-heavy industry, even drawing Stephen King to testify (I’m reading Salem’s Lot right now, for what it’s worth—Happy Halloween!). Maybe someone should write a book about the whole affair.

I have some news to share… Yesterday, we found out that Term Sheet has won an EPPY award for Best Business and Finance Blog among publications with more than 1 million unique visitors. What an honor! Thank you for tagging along on this journey with me and the Term Sheet team this year. It takes a village to put out this newsletter, so I just want to take a moment to thank Jackson Fordyce for his hard, tireless work and never-ending enthusiasm with this deals section, Ashley Sylla for her subject-line prowess and data-crunching skills, Jack Long for his line-editing genius, Lee Clifford for her daily fabulous editing (sometimes late at night or into the mornings), and Anne Sraders, who has made my life 10 times easier since hopping on board and has brought her fresh perspective and thorough reporting into your inboxes. And a special shout out to Kevin Kelleher and Lucy Brewster, who have made it possible for me to take time off this year. 

Most of all, thanks to you—for your patience as I learn the exciting and opaque world of the private markets, for pointing out my grammar mistakes, for sharing your insights and your stories, for being welcoming, and for being vulnerable. Thanks for simply opening up my newsletter—even when I am writing about getting a flat tire or divulging the learnings from an SEC filing I stayed up until 1 a.m. parsing through the night before. Term Sheet readers are truly the best in the business.

And now for this month’s cartoon…

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Bright Machines, a San Francisco-based software-based manufacturing company, raised $100 million in Series B funding led by Eclipse Ventures

- Qwick, a Phoenix-based staffing platform for hospitality businesses and professionals, raised $40 million in Series B funding. Tritium Partners led the round and was joined by investors including Album VC, Kickstart, Desert Angels, and Revolution’s Rise of the Rest Seed Fund.

- Money Fellows, a Cairo-based fintech platform that digitizes money circles, raised $31 million in Series B funding. CommerzVentures, Middle East Venture Partners, and Arzan Venture Capital co-led the round and were joined by investors including Invenfin, National Investment Company, Partech, Sawari Ventures, 4DX, and P1Ventures.

- Braavos, a Tel Aviv-based smart contract-based wallet firm, raised $10 million in funding. Pantera Capital led the round and was joined by investors including Road Capital, BH Digital, DCVC, Crypto.com, Matrixport, and Starkware

- Rewind.ai, a remote-based search engine platform, raised $10 million in funding. Andreessen Horowitz led the round and was joined by investors including First Round Capital and others. 

- Software Defined Automation, a Boston and Munich, Germany-based industrial-control-as-a-service (ICaaS) provider for automation engineers, raised $10 million in seed funding. Insight Partners led the round and was joined by investors including Baukunst VC, Fly Ventures, and First Momentum

- Vizit, a Boston-based image analytics software company for brands and retailers, raised $10 million in Series A funding. Infinity Ventures and Brand Foundry Ventures the round and were joined by investors including eGateway Capital, Lakefront Partners, Lubar & Co, and others.

- GoodShip, a Nashville and Seattle-based collaboration platform for the supply chain industry, raised $2.4 million in funding. FUSE led the round and was joined by investors including Cercano Management, Flexport Fund, Innovation Endeavors, Sope Creek Capital, Kindergarten Ventures, and other angels. 

- SURI, a London-based toothbrush startup, raised £2 million ($2.29 million) in seed funding. Hambro Perks and JamJar Investments invested in the round. 

PRIVATE EQUITY

- Blackstone agreed to acquire a majority stake in the climate technologies arm of Emerson Electric, a St. Louis-based technology, software, and engineering company. The deal is valued at about $14 billion. 

- An investor group led by Littlejohn & Co. acquired Lipari Foods, a Warren, Mich.-based specialty food distributor. Per terms of the deal, the Lipari family, management, H.I.G. Capital, and Sterling Investment Partners will retain a minority stake. Financial terms were not disclosed. 

- Resolution Economics, a portfolio company of Levine Leichtman Capital Partners, acquired Berkshire Associates, a Columbia, Md.-based provider of affirmative action plan consulting and human resource compliance services. Financial terms were not disclosed.

- Stronger Youth Brands, backed by Susquehanna Private Capital, acquired Little Kickers, a London-based youth soccer programs franchisor. Financial terms were not disclosed.

FUNDS + FUNDS OF FUNDS

- Streamlined Ventures, a Palo Alto-based venture capital firm, raised $102 million for its fifth seed fund focused on tech startups using data science, A.I., software automation, APIs, and Web 2.5. 

PEOPLE

- GTCR, a Chicago-based private equity firm, promoted Luke Marker, Stephen Master, and KJ McConnell to managing director. 

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