The Funds and Syndicates on AngelList have invested in almost 5,000 early-stage companies over the past five years and that number increases every week. We track the valuation of these startups and are generally notified about fundraising rounds or exits as they happen. The breadth of our investments gives us a detailed close-in view of early-stage fundraising dynamics in venture capital.
Every month, the AngelList Venture Data team produces an internal report about the state of the early-stage venture market based on the valuation dynamics of our investments. To create the report, we consider what happens to every active, “seasoned” company (“seasoned” meaning that we track an investment in the company that is at least 180 days old) over a trailing three-month window. We classify the companies into five separate categories based on their price-per-share valuation change in the window: No change, Markup, Markdown, Exit Up, or Exit Down. Since we generally only update valuations at priced rounds, at any given three-month stretch, perhaps only 10% of companies will show a change in value. As AngelList skews towards earlier investments, we estimate that about three-quarters of the companies we track for this report are at the Seed or Series A stage.
This is our current dashboard view, updated through August 2020. Time goes left to right, so the most recent activity is closest to the right-hand side of the plot. The top plot is a split between good events (markups and exit ups), which are in shades of green and are on the positive side of the top plot, and bad events (markdowns and exit downs), which are in shades of red and are on the negative side of the top plot. The bottom plot tracks activity rates overall and exit rates specifically. The dotted black line is the median outcome - when it’s positive, the typical startup event that we observed was positive.
So what does this mean? The second quarter of 2020 was perhaps the worst quarter that we have data on, but July and August appear to suggest a rebound in positive activity for the third quarter. This data provides further evidence of the lack of correlation between early-stage venture capital and the public markets. The first quarter of 2020 was terrible for the public markets and mediocre for startups, the second quarter was terrific for public markets and challenging for startups. We’ll see what the third quarter will bring for both asset classes.