Key takeaways
54%
US VC investment year-over-year (YoY) increase in commerce enablement — an encouraging statistic in a difficult fundraising year for most consumer tech subsectors.
1 .5X
Median burn multiple for early-stage companies in Q4 2022, down from a high of 3.1x in Q1, as consumer tech companies pivoted towards profitability and reduced cash burn.
4.3X
Median valuation step-up from seed to Series A, a slight drop from 2021 but higher than the 2.8x step-up in 2020, an indication that VC demand remains strong for early-stage consumer startups.
Companies deprioritize growth
Consumer tech companies are cutting costs and maximizing revenues to maintain liquidity. The economy and elevated inflation is squeezing runway which is down to a median of 11.4 months of remaining liquidity.
Less runway combined with longer wait times between deals may pressure founders to consider an add-on round, down-rounds or alternative financing tools such as venture debt or down-rounds.
Source: SVB proprietary data and SVB analysis.
Source: SVB proprietary data and SVB analysis.
Revenue down across all subsectors
Consumer tech revenue dropped as post-pandemic consumer behavior shifted and consumer spending decreased. In Q4, 61% of VC-backed consumer companies posting quarter-over-quarter revenue gains, down from 75% last year.
To compensate for softer revenue, consumer tech companies are adding new income streams and cutting spend with the bulk of cuts coming from areas like talent.
Investment slows
Capital investment fell across most consumer tech subsectors from 2021 highs, but momentum from the uptick in digital commerce during the pandemic helped fuel US VC investment in commerce enablement by 54% YoY. The reverse logistics niche within commerce enablement saw a 57% uptick in deal activity YoY.
With the window closed on public tech exits, consumer tech companies must be more efficient, better equipped for long-term growth and look for ways to capitalize on shifting consumer trends.
Source: PitchBook, SVB proprietary data and SVB analysis.
Source: PitchBook, SVB proprietary data and SVB analysis.
Late-stage valuations return to earth
Capital scarcity in this difficult funding environment has caused valuations to rebase. Later-stage valuations have fallen to pre-pandemic levels while seed-stage valuations have plateaued.
Consumer tech companies are focusing on unit economics as metrics like lifetime value (LTV) and cost of acquisition (CAC) are under greater scrutiny by investors who want to know that their investment will be put efficiently to work.
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