Believe it or not, some startups are still trying to raise money at 2015 prices.

These founders don’t realize (or accept?) that the situation has changed. Capital is becoming risk-averse. And for fairly good reasons.

It’s easiest to see this shift in the stock market, where things have been a bit rocky. S&P 500 earnings dropped in 2015 versus 2014, after a long string of rising profits.

And today, there’s no new Fed quantitative easing to goose the markets higher (for now). Further, many have argued that a diligent central bank should have normalized interest rates years ago.

Valuations are extended, and have been for a while. Take a look at the Russell 2000, which now trades at a price-to-earnings ratio of 111. A “normal” P/E for this small cap index would be 20 to 25, roughly.

Now let’s look at some private market data.

Private Market Slowdown

According to data from AngelList, average startup valuations on its platform dropped from $4.9 million in the third quarter of last year to $4.2 million in the fourth quarter.

In addition, overall venture-capital funding volume fell 30% from Q3 to Q4, according to CB Insights.

Both are interesting data points, but the drop in startup valuations is what stands out to me. It means that investors have essentially declared the right to be more picky. Funding volume is more of a lagging indicator, because it depends on funds that were mostly raised months or years ago.

Savvy startups are doing the right thing by lowering their prices if the demand isn’t there. Others are raising “flat” priced rounds, as Haystack Fund’s Semil Shah discusses in a recent post. Neither is an easy thing to do, because a flat round suggests no progress has been made (even if it has). And nobody likes a “down round,” where existing investors’ share value can be cut in half – or worse. Yet this is where we are in the cycle.