In today’s early-stage venture market, the most richly valued startup types have been identified. New data has revealed that seed and Series A markets are not equal when it comes to valuations. If you want to get the largest possible early-stage valuation, there is a specific category of startup that venture capitalists are willing to pay more for. While building an AI startup may be a solid choice for avoiding a down-round, that is not the only option available.
Data from Carta’s CEO, shared on the Equity podcast, provides a simple and clear breakdown of early-stage valuations and fundraising sizing. To start with, let’s examine seed data.
When evaluating seed valuations, venture capitalists are willing to pay the most for fintech startups. Fintech startups include those that focus on alternative lending, insurance or new payment methods. By focusing on fintech startups, venture capitalists are able to make investments in startups with a lower risk profile, as many of these startups are building off of existing financial systems or regulatory frameworks.
Another popular category for seed valuations is biotech. Biotech startups focus on creating new drugs or medical devices, and they have been known to receive very high valuations at even the seed stage.
But not all categories have the same level of demand in the seed stage. For example, startups focused on gaming or social media have not achieved as robust valuations at the seed stage, due to a more difficult path to monetization and revenue growth.
In summary, if you are looking for a higher seed valuation, fintech or biotech startups may be your best bet. However, it is important to note that while these categories may receive higher valuations from venture capitalists, that does not guarantee success. Ultimately, the strength of the team, market opportunity and execution of the product will always be the most important factors in the success of any startup.
