The Inflationary Forces in Startupland

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2021-05-31 12:00:09

Over the last ten years, the 75th percentile post-money valuation of a cloud software or infrastructure company has grown 11% annually. In 2021, the post-money valuation has spiked 60% from $48.1m to $77.0m. While not as hyperbolic an inflation rate as copper or lumber, the price trajectory of early stage cloud startups does result from a similar supply demand/imbalance. And this isn’t the first time annual valuation deltas have touched this magnitude.

I’ve plotted the post-money valuations for US cloud and infrastructure companies above for the Series A. Each of the three quartiles have inflected in the first 5 months of this year.

The seed market compounds at a higher rate over the same decade at 15%. But it hasn’t soared like it’s older brother in 2021, preferring a more consistent path.

If we plot the annual growth rates for the 75th percentile Series A, we observe the expansion in valuations occurs in fits and starts. 3 of the 11 years recorded 40%+ growth. 3 of the years saw declining prices.