Down rounds have become increasingly common in US and European VC fundraising. According to Forbes, approximately 20% of all US VC rounds in 2024 were down rounds – a notable increase from the historical average of around 10%. In Europe, both 2023 and 2024 also experienced a higher percentage of down rounds, even as the overall number of fundraising events dropped. Pitchbook data indicates that down rounds accounted for 18.9% of all European VC rounds in 2023 and 18.1% in 2024, underscoring mounting pressure on startup valuations.

Additionally, the time interval between fundraising rounds has stretched well beyond the traditional 18 to 24 month window, making more aggressive growth strategies riskier. The obvious solution here is a bridge round; however, companies relying on bridge rounds appear to be at a disadvantage, with Forbes data revealing that such firms are less likely to secure subsequent funding.

These trends suggest that the challenges faced by VCs over the last few years have not yet abated. Following record valuations across industries (but particularly in tech) during 2021 and 2022, VC firms have struggled to achieve their target exit multiples. Economic uncertainties, geopolitical risks, and shifting market dynamics have all played a role, but the drop in valuations also serves as an important reminder for investors to remain objective regarding their investment strategies.

In the current fundraising environment, companies are advised to adopt a more cash-conscious approach and be highly strategic about resource allocation. This cautious stance is essential not only for startups seeking to navigate turbulent market conditions but also for VC investors aiming to optimize their portfolios and mitigate risk.