MainStreet’s valuation could fall 60% to $200 million amid investor recapitalization pursuit

Weeks after laying off about 30% of its staff, MainStreet is said to be raising another round of funding at a $200 million valuation, sources tell TechCrunch.

The news is significant in that MainStreet, which helps other startups uncover tax credits, raised $60 million in March of 2021 at a post-money valuation of $500 million. SignalFire led that round, which also included participation from Ashton Kutcher’s Sound Ventures and Tusk Venture Partners, among others.

Sources say the down round comes as MainStreet also pursues a recapitalization, in which older investors are selling their stakes at a discounted valuation (yay, liquidity) with new ones entering at friendlier terms. The combination of a fundraise and recapitalization signals that the fintech may have lost some belief from its earliest investors but wants more capital to continue operations.

TechCrunch has reached out to the San Jose, California-based company for more information regarding this latest fundraise and will update this post if and when we learn more.

The deal — which is still in the works and not yet final, according to sources — is another sobering example of current market conditions. For founders, recapitalization events are rarely good news because departing investors are a negative signal. The looming round also suggests that MainStreet was not able to land an extension round from its existing investors, so it had to settle for a smaller round. The ultimate valuation of the company is thus a mix of what older investors that knew the company since launch think it’s worth, and where a new cadre of investors think it is today. 

In early May, TechCrunch reported that the company had conducted the layoffs. At the time, CEO Doug Ludlow did not comment directly but did address the move in a tweet.  

In that tweet, Ludlow said MainStreet “took the difficult step of reorganizing and restructuring the company.” He did not say if these cuts impacted all teams across the company or if any executives were laid off. He also did not state exactly how many employees were impacted by the move.

“We believe that there is a very strong chance that today’s incredibly rough market is only going to get worse, and potentially remain so for months, if not years,” Ludlow continued in his Twitter thread.

Thus, MainStreet’s new said value could be a sign of investors needing cash, and yet another data point of tech startups experiencing valuation haircuts. Earlier this month, TC’s Alex Wilhelm examined new data that showed a spectrum of declines in the average valuation for startups (TechCrunch+ subscription required) that startup Carta has visibility into — thousands of deals from tens of thousands of companies — which matched current venture capitalist chatter that the value of startups has dramatically changed since 2021 highs. For the unacquainted, Carta is a unicorn whose software helps companies manage their cap table.

MainStreet is backed by Shrug, Moxxie Ventures, Weekend Fund, Gradient Ventures and SV Angels. According to Crunchbase, the company has raised $64.7 million in known venture capital to date.

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