Across all industries, startup investments are down 50% YOY according to Crunchbase. Pet health, typically considered immune to the vicissitudes of macroeconomic trends, saw practice multiples drop from a high of 18+ times EBITDA to a more sustainable 8-13x EBITDA. Specific data around pethealth startups is a little harder to come by, but anecdotally, we’ve been hearing that venture capital is either not interested, or deals take substantially longer than what we saw a couple years ago when investment was red hot.
When interest rates were low, there was a flood of capital that came into the pet health space. According to many private equity firms that I spoke with, there was an increasing demand to fill out their portfolios with something in pet health area. Now, with capital being expensive, most private equity companies are investing less and pet health is not immune to this.
It’s worth noting that private equity and venture capital should not be the primary means of growth that startups are seeking; instead, startups should be focusing on trying to solve real problems for real people. Focus on operational efficiency. Focus on building the right team, hitting the market at the right time, and less on multimillion dollar exits. One of the best ways to weather the macroeconomic trend storm is to seek safe harbor in a solid customer base.
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