If you are a startup founder raising a venture round this year, you’ll get a lower valuation than you might have in 2021 or 2022. New data from CB Insights details that there have been sharp valuation declines across nearly every startup stage around the world.

But you probably know that already. A more interesting question to ask, then, is if deal volume is going to shrivel across stages, too. Sure, it’s useful to know what the new norm is for, say, seed-stage or Series B deals, but it’s far more important to understand how quickly the later stages of the venture market are contracting.

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A sharper decline in late-stage dealmaking may be a bad thing or not, depending on how large you think the startup market could grow before there are too many companies trying to scale at the same time.

On one hand, a more extreme decline in late-stage dealmaking would mean that startups past their youth — your Series B and C companies — will find it harder to raise pre-IPO capital from venture investors. On the other, startup stages are not only a way to segment the venture market into simple buckets, they also serve as a sort of filter to weed out companies that do not meet expectations for growth and scale.

From that perspective, a smaller late-stage market would imply that weaker startups would not be able to access capital that they couldn’t use efficiently. That’s brutal for startups stuck between rounds and stages, but it could be a good thing for the wider tech market — quick failures recycle human capital faster than overfunded startups that end up as expensive zombies.

This morning, let’s talk about new valuation norms and explore just how sharply the late-stage market is on pace to contract this year.

Falling valuations

Let’s get the obvious stuff out of the way: No matter which stage we are looking at, median valuations declined in the second quarter of 2023 compared to a year earlier, according to CB Insights. And it appears the later the stage, the sharper the decline: seed/angel deal valuations fell about 15%, while valuations for Series D rounds and later tanked by a whopping 60%.

But things aren’t as straightforward as they might seem: A closer look at more recent periods yields a slightly better picture. Median valuations improved slightly for seed/angel and Series B deals in Q2 2023 compared to Q1 2023. Startups that raised Series D rounds or later, however, still don’t seem to be doing well: their median valuation declined by 33% quarter-on-quarter.