---
title: "Surprising Data Points about the Venture Capital Market"
description: "Explore key venture capital trends: 20% downrounds, 40% longer fundraising cycles, and stable seed valuations reveal shifting dynamics in 2023's startup market."
categories: ["data analysis","trends","fundraising"]
keywords: ["venture capital","fundraising trends","downrounds","seed valuations","Tomasz Tunguz","Carta","bridge rounds","employee stock options","startup market analysis"]
ai_summary: "Explore key venture capital trends in 2023, including downrounds, fundraising cycles, and employee stock option exercises."
date: 2023-08-08
lastmod: 2026-07-28
canonical_url: https://www.tomtunguz.com/carta-state-of-the-market-report/
author: "Tomasz Tunguz"
---

[Carta released their state of the market report](https://carta.com/blog/state-of-private-markets-q2-2023/?utm_medium=email&utm_source=blast&utm_campaign=20230802-amer-general-sopm_q2_report&utm_content=prospects&mkt_tok=MjE0LUJURC0xMDMAAAGNVcJuUeHRRMtq-nWL53M-EdczYFThIeqAbRmT6HuguBwixi5VgJ6IAziR_wKWvV7jU2L4gdjIlITClZXyYcnx6XEyn-MqLsv4O9FKELdRHxMZwHk). A few data points stood out to me

Downrounds constitute 20% of all rounds, up 2x from historical norms. Bridge rounds account for 38% of all rounds in Q2. Cooley reported 2.9% of rounds recapitalized the company. Recaps effectively delete the previous cap table & start a new one. 

These are all signs of the harder fundraising times. 

The glass-half full view is that 80% of all rounds are flat or up. 

Time between rounds has jumped about 40%. Curiously, this is roughly consistent with the lengthening in sales cycles software companies are enduring with customers. Perhaps there's a parallel in buyer psychology in software & in venture capital. 

Seed valuations remained relatively constant. Analyzing the data for yesterday's post, I noticed the seed market weathered through the global financial crisis relatively unscathed, a parallel to today - both about a 15% drop in pre-money valuations.

Last, employees have exercised options at the lowest rate since the dawn of Covid at 26%, down from 46% two years ago. 

In the public markets, executive share selling patterns can be important signals for investors. If employees buy more shares, they believe in the company. There's a parallel for employee option exercise. 

I wonder if later-stage investors will begin to use employee exercise rate as an input to their diligence for this reason - especially during this next transition period where the capital markets plateau & renormalize. 

The greater the employee confidence in a business, the more compelled an investor could be to lead a round.