One of the clear signs of a high-tech crisis is a decline in the value of a company that has raised money. A company that raises at a value lower than the value at which it raised in the past has run into a real crisis, sometimes even through no fault of its own. The significance of what is known as a downround is a decrease in the holdings of all shareholders, employees, founders and investors.
In the first half of 2022, Israeli startups recorded a significant decrease in the number of rounds at an increased company value and a slight increase in the number of rounds at a decreasing value. In the first half of 2022, 90% of the fundraisings were at an increased value compared to 96% last year and 9% of the fundraisings were at a decreased value compared to 4% last year. These data come from a survey conducted by the Shibolet law firm in collaboration with the law firm Fenwick & West LLP.
The survey also shows that in the first half of 2022 there was a significant increase in early-stage recruitments and a decrease in recruitment late-stage rounds.
In view of the insecurity in the markets, companies in growth stages that are now seeking to raise funds are forced to face extremely difficult fundraising conditions such as a decrease in the value of the company and a demand from investors to protect the valuation at which they invested in.
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