I wish I had a chart of the bid/ask spread in venture capital today.

The bid/ask spread in VC is the difference between the post-money valuation between a VC (the bidder) & a company (seller).

In the past few years, the spread has been tight. The market is liquid. Many startups sell shares to buyers at mutually attractive prices. Like the old stock trading floors with brokers yelling at each other, but in our era, we negotiate over Zoom coffees instead.

Today, the bid/ask spread measures in the tens or hundreds of millions of dollars depending on the company’s stage.

A startups who had verbal offers in Q1 at $500m may expect to raise at $450m. The 10% originates from the Founder Sentiment Survey.

But the stock market comparables imply the company should trade at a 50% discount or $250m. The bid/ask spread stretches to 200m on 450m or 44%.

That’s not so much a spread as an abyss.

When the bid/ask spread exceeds 5 or 10%, the market seizes up, like a combustion engine without oil. No one trades. Investors pack their vests into a rolly-suitcase and head to the beach.

Over time, buyer & seller price expectations will converge. The market will cough, sputter, & turn over again, the engine humming.

A chart of the bid/ask spread would visualize when startups can expect healthy market once more and where it will settle.