US Venture Capital Report 2022 — The Repricing

The 2022 repricing of US venture capital is often described as a crash. That description is misleading in a specific way: a crash implies a single moment, and this was a propagation — a correction that moved through the market in a sequence, over roughly eighteen months, arriving at different stages at different times.

The sequence was determined by a single fact: private companies are only repriced when they transact. A public company is repriced continuously. A private company's valuation is whatever the last round said until a new round says otherwise.

So the correction moved as follows. Public markets repriced first, immediately, because they always do. Late-stage private companies repriced next, over months, as they came to market and discovered that the crossover investors who had anchored their prior round were now applying much lower public multiples. Growth stage followed. Early stage repriced last and least, because early-stage companies had raised in 2021 with two or three years of runway and simply did not need to transact.

Each stage looked stable right up until it repriced, because the data describing it was generated by transactions priced under the previous conditions.

The second defining feature of the year was structure. Faced with a company whose 2021 valuation was no longer supportable, an investor has two options: pay less, or pay the same and take protection. Many chose the second — for reasons that were often the company's preference as much as the investor's. That choice made headline valuations look more resilient than the economics warranted, and it is the reason valuation data alone materially understates how much 2022 repriced.

How a correction propagates through private markets

This is the most useful mechanism in the report, because it explains why private market data lags reality in a predictable, quantifiable way.

Public markets mark to price. Every share trades continuously; the valuation updates by the second and reflects current conditions by construction.

Private markets mark to event. A company's valuation is set at a financing and stays there until the next one. Between rounds, a company's carrying value can reflect conditions from eighteen months ago with no mechanism forcing an update.

The interval between rounds therefore determines the lag, and it varies systematically by stage:

• Late stage raises most frequently and in the largest amounts, often with a specific use of proceeds. It repriced first.
• Growth stage typically raises on an eighteen-to-twenty-four month cycle. It repriced through mid-to-late 2022.
• Early stage had raised in 2021 with unusually long runway, because 2021 rounds were unusually large. Many did not need capital until 2023 or 2024.

This produces a specific and misleading data artefact. Reported median valuations at a stage reflect only the companies that transacted. In a falling market, the companies that transact are disproportionately those that had to — either because they ran out of runway, or because they were strong enough to raise on acceptable terms. Companies that could wait, waited.

That is a selection effect operating in both directions at once, and it means the reported median is not a sample of the market. It is a sample of the companies for whom transacting was the best available option.

A private market valuation index does not measure what companies are worth. It measures what the subset of companies that chose to transact agreed to, under conditions that may already have changed.

The practical implication for allocators is that the absence of a markdown is not evidence of value. A position held at its 2021 mark in mid-2022 was not a position that had held its value. It was a position that had not been remeasured.

Structure as a substitute for price

The second mechanism is the one that makes 2022's valuation data hardest to read.

When an investor believes a company is worth less than its last round, a headline down round is not the only response available. The alternative is to invest at or near the old price while obtaining terms that change the economics:

• Liquidation preference multiples above 1×. The investor receives two or three times their money back before anyone else receives anything. The headline price is unchanged; the effective economics are dramatically different.
• Participating preferred. The investor takes their preference and shares pro rata in the remainder — being paid twice from the same proceeds.
• Ratchets and anti-dilution. If a later round or an exit prices below a threshold, the investor receives additional shares to compensate, diluting everyone else retroactively.
• Seniority. The new round sits ahead of all prior preferred in the payout stack, subordinating earlier investors who had assumed equal standing.

Why would a company accept these? Because a down round has costs beyond the number: employee option strike prices and morale, anti-dilution triggers in prior rounds, signalling to customers and future investors, and the reset of internal expectations. A structured round at the old headline price often looks better to the company than a clean round at a lower one — right up until an exit occurs and the payout stack is applied.

The consequence for anyone reading market data is direct:

• Reported valuations overstate the resilience of 2022 pricing. Flat rounds with 2× participating preferences are down rounds that do not appear in the down-round statistics.
• The distortion is worst at exactly the stage where it matters most — late and growth stage, where structure was most common.
• Common shareholders bore the cost, including founders and employees, in a form that only becomes visible at exit.

Any assessment of how far 2022 repriced must read terms alongside price. A dataset reporting only valuations will systematically understate it.

The bridge round year

The defining financing instrument of 2022 was the bridge — an extension of the existing round, typically as a convertible note or SAFE, often from existing investors, deliberately structured to avoid setting a new price.

The logic was straightforward for everyone involved:

• For the company: capital without accepting a mark that would trigger the cascade of down-round consequences.
• For existing investors: the position is supported without the fund having to write down its own carrying value.
• For both: a bet that conditions would improve before the note converted, and the price could be set in a better market.

Bridges were the rational choice in early 2022 if you believed the dislocation was temporary. By 2023, it had become clear that many were deferring an adjustment rather than avoiding one, and the accumulated notes converted into rounds priced in a market that had not recovered — often on worse terms than the original down round would have been.

There is a general point here. A bridge converts a valuation problem into a time problem. That is a good trade if time is on your side and a bad one if it is not, and the decision has to be made before you know which.

The measurement consequence is that bridge activity is largely invisible in valuation data. A market with heavy bridge usage looks like a market with few down rounds, because the down rounds have not happened yet.

Seed: insulated, then constrained

Seed-stage activity held up longest in 2022. The reasons were structural rather than a judgement that early-stage companies were unaffected.

• Seed valuations were never anchored to public multiples. A pre-revenue company cannot be priced off a public comparable, so the crossover-anchoring channel described in the 2021 report did not reach it.
• Seed funds are small and specialised, and did not have the crossover capital that had inflated later stages.
• Seed cheques are small enough that they were not the first thing cut when institutions reduced pacing.

But insulation is not immunity, and the constraint that eventually formed at seed operated through a different channel: the LP chain. Institutions facing the denominator effect described in the 2022 slot-A report reduced new commitments across private markets. Seed funds raising in 2022 and 2023 found the market harder, and smaller funds deploy less capital into fewer companies.

That constraint is the origin of the cohort gap that the 2025 and 2026 reports describe. Seed formation that thinned from 2022 does not become visible as a problem until that cohort should be raising Series A in 2024–2026 and there are fewer of them than usual.

It is the quietest consequence of 2022 and probably the longest-lasting. A valuation correction resolves when prices adjust. A cohort gap resolves only when the missing companies are eventually funded, several years late, by which point the opportunities they would have addressed have been taken by someone else.

The selection effect in downturn data

The observation that reported valuations in a downturn reflect only the companies that transacted deserves fuller treatment, because it is the reason private market data is least reliable exactly when it is most consulted.

Who transacts in a falling market:

• Companies that must. Runway is exhausted and the alternative to raising on poor terms is closing. These transact at low valuations, frequently with heavy structure.
• Companies that can raise on acceptable terms. Strong performers whose metrics support a reasonable price. These transact at valuations that look healthy.
• Everyone in between waits. A company with eighteen months of runway and a valuation it cannot currently support has no reason to test the market. It defers.

The reported median is drawn from the first two groups, which are the extremes. The middle — the largest group — is absent from the data entirely.

Three consequences for interpretation:

• The median describes a bimodal sample. The same problem the 2025 report describes for the market as a whole, arriving three years earlier through a different mechanism.
• The direction of the bias is not stable. Early in a downturn, the strong companies transact and the distressed wait, so reported valuations look resilient. Later, the distressed run out of runway and transact, so reported valuations fall sharply. The apparent timing of the correction is partly an artefact of who was forced to transact when.
• Volume data is more informative than price data. A sharp fall in deal count with stable reported valuations means most companies are not transacting, which is a downturn signal that the price series does not show.

The practical correction is to read count and price together, to treat a stable median with falling count as evidence of deferral rather than resilience, and to remember that the companies whose valuations would be most informative are precisely the ones absent from the dataset.

A private valuation index in a downturn samples the companies for whom transacting was the best available option. That is not a sample of the market. It is a sample of the constrained and the strong, with everyone else missing.

What an allocator could act on

Read terms alongside price. A flat round with a 2× participating preference is a down round that does not appear in down-round statistics. Any assessment of how far 2022 repriced using valuation data alone systematically understates it, and the Cooley and Fenwick quarterly surveys track terms specifically for this reason.

Treat the absence of a markdown as absence of measurement. A position held at its 2021 mark in mid-2022 had not held its value — it had not been remeasured. Mark-to-event valuation means a carrying value can reflect conditions from eighteen months earlier with no mechanism forcing an update.

Compute the propagation lag by stage. The interval between rounds determines when a stage reprices: late stage first, growth next, early stage last. This is structural and predictable, which means an investor can anticipate which parts of a portfolio have already adjusted and which have not.

Assess a bridge as a bet on time. A convertible instrument defers pricing rather than eliminating it. That is a good trade if conditions improve and a compounding mistake if they do not — and the decision must be made before you know which. The 2023 report describes how that bet settled: mostly badly, with the companies that took the mark in 2022 generally ending up in better shape than those that waited.

Watch the LP chain for the seed constraint. Seed was insulated from public market transmission because its valuations are not anchored to public comparables. It was not insulated from the capital channel — seed funds raising in 2022 and 2023 found the market harder, which is the origin of the cohort gap surfacing from 2026. The transmission was slower and more consequential.

What 2022 established for US venture

• Correction propagation was demonstrated stage by stage, and the lag was shown to be a function of financing frequency rather than of fundamentals.
• Private market data was shown to lag by construction, and the absence of a markdown was shown not to be evidence of value.
• Structure was established as a substitute for price, permanently complicating the reading of valuation data.
• The bridge round was shown to convert a valuation problem into a time problem, with the outcome determined by whether time helped.
• The seed constraint formed, creating the cohort gap that surfaces from 2026 onward.