The valuation of tech start-ups is declining

Tech companies looking to raise funds are seeing their valuation half or triple compared to a few months ago. After the 2021 surplus, the sector is entering a phase of normalization.

The tech sector is going through a complex period of stress, adjustment of appreciation and caution. Investors and traders look at each other like faience dogs waiting for what will happen. Depreciations of valuations of listed companies have a ricochet effect on private ones. And it’s exactly us with significant consequences that feel that way.

Entrepreneurs currently seeking funds and seeing their values ​​fall have agreed to speak with us on condition that their anonymity is respected. “Our company’s valuation split in a few weeks. We need to raise funds now, it’s a disaster,” said one of them. “We are in the middle of valuation negotiations with investors. According to them, we have lost two -thirds of our value. This is absurd”, said another.

Children’s appreciations and fewer technological shoots are in the free fall, the feeling is shared by both traders and investors. But if we retreat, we also observe that the valuations obtained by companies in the sector last year were very high. Too high though, according to some. “In the second half of last year, appreciations exploded. We saw incredible fundraising,” according to a prominent figure in the Belgian technology ecosystem. One impression confirmed by Cédric Bouvy, who advises investment funds as a Bain Partner in Brussels: “Since 2020, we have noticed a significant increase in sector values. This also happened in 2021.”

Valuation data is generally not disclosed by investors and traders, but data compiled by Bain confirms this upward trend up to the beginning of this year. To calculate a valuation, you multiply the EBITDA (earnings before interest, taxes, depreciation and amortization) of a company. “We see that multiples in the field of technology have gone from approximately 13 to 14 times EBITDA in 2018-2019 to 16 to 18 times in 2020 and 2021.”



“We’re in the normalization of the market after last year’s excesses.”

Frank Maene

Managing Partner of Volta Ventures

A collapse to correct the excesses

The historically low level of interest rates in 2021 has pushed the market a mass of new investors attracted by the promises of growth in the technology sector. “There was too much money and very few deals made, which caused some appreciation to explode.” The current collapse in valuations is therefore not an exploding bubble, but rather a correction after an abnormal high. An observation that applies worldwide, but also for Belgium. Frank Maene, Belgian reference investor for more than 20 years in the technology sector, confirms: “We are in a normalization of the market after last year’s excesses.”

The descending signal came from the largest. Tech companies listed on the stock exchange, mostly in the U.S. market, have seen their valuations sometimes split or triple. “There is a ripple effect for companies that are in their 3rde o 4e fundraising. Not yet for very young companies that are in first or second fundraising, but it can happen ”, continued Frank Maene who is at the head of investment fund Volta Ventures.

Some got funds before the storm with inflated amounts. One might, for example, quote Deliver, this Ghent start-up created software to help restaurants better manage online orders. Following a fundraising of 132 million euros in January, it is worth 1.26 billion euros, making it a unicorn. “If their fundraising were to take place today, the amount would be much more likely to be approximately 400 million euros,” whispered one of our interlocutors.

Divide into two or three

This situation of depreciation of valuations is very complex government for an entrepreneur. Some have increased over the past two years at X valuation, and with their current increase, their valuation has been lowered. “As an entrepreneur, you don’t want to have a lower value compared to a previous fundraiser. This is a terrible sign and above all it is very expensive for the entrepreneur”, explains the founder of a Belgian technology start- up.

Actually this situation can be costly for the entrepreneurbecause when a company’s valuation is changed down from one round of funding to the next, there is generally very important dilution clauses for founders who must sell portions of their capital to their investors to compensate for the fall in valuation.

For companies that can’t wait for a better time to raise funds, Hurry up. “The market is still falling. We need to get money as soon as possible, hoping that in 18 or 24 months, the situation will be more in their favor.”

The situation is complicated for entrepreneurs, especially those seeking funds, but also for investors, according to one of our interlocutors who gravitates to the financing ecosystem of Belgian technology companies. “We’re going through a very complex 6-month period. Investors have to pick up their red marker and sort their portfolio. The environment is more cynical than in the past few months.”

Is the worst over?

It’s hard to object to the feelings of the entrepreneurs we spoke to. We tried to put numbers into words, pero parang mission impossible. “This data will not be available for 3 to 6 months,” Cédric Bovy explains to Bain, who however also confirms the downward trend. “The feeling is stagnation and decline, but not a drop of the same magnitude as seen in public markets. At least for now.” This is explained by the fact that the companies that have been the subject of transactions in recent weeks are the ones that have proven their profitability. “Appreciations are definitely under pressure in the coming months.”



“We’re not eating investment into a big spoon. We’ve been making a profit since 2017.”

Alessandro Mazzocchetti

CFO of Odoo

Not all tech companies are affected. Companies active in major social trends and have profitability in sight can pass between drops. Those who have proven that their business model has an immunity collar with investors. The best example is the technology company Walloon odoo that appreciation continues to rise and seems to ignore the current situation. Its financial director Alessandro Mazzocchetti explains why: “Our shareholders, like Summit Capital, are strengthening our funding round because we are posting 60 to 70% growth in our turnover. But more after all, we’re not eating capital with a big spoon. We’ve been making a profit since 2017. “



“It took 6 years to recover from the 2001 crisis, but here the situation is different, because the money is still there.”

Frank Maene

Managing Partner of Volta Ventures

For others, the big question is: how long has this fall in values ​​been. “It took 6 years to recover from the crisis in 2001, but here the situation is different, because the money is still there. Investment funds will wait and will certainly renegotiate current deals with no less customer-friendly clauses. entrepreneurs. the roles are therefore reversed “, explains Frank Maene.

however, all is not vague for investors. New investment opportunities are a godsend, but companies that are already in the portfolio and their falling values ​​will have a negative impact on the total value of investment funds. The situation is therefore tense and full of uncertainty on each side of a rope that everyone tries to pull as much as possible towards him while waiting for a more favorable time.

The summary

  • Tech companies looking to raise funds are seeing their valuation half or triple compared to a few months ago.
  • On the investor side, the downward trend has been confirmed, but there has been talk of market normalization after excessive recent years.
  • For those who need to raise funds, time is running out. Those who have proven that their business model should pass between the drops.

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