Market dilemma
“Market dilemma”– a cartoon that illustrates how venture firms are reacting to the changing macro environment.
Since the beginning of the year, the NASDAQ is down 15%, some tech stocks have dropped 75% off their all-time highs last November, and there has been a slew of dismal IPOs.
However, with over $100Bn raised in venture capital in 2021 alone, venture investors have felt largely insulated from this turbulence, but this has not stopped them from adjusting valuations in their portfolio companies.
Tiger Global, the most active investor in 2021 with 335 investments, is cutting valuations on late-stage private companies by an average of 25% when there is a new round.
As a result, many private companies are looking to extend their runway to the next investment round and hope the public market drop is a passing phase.
The problems will stack up if the macro investment continues or gets worse, and then startup companies with less room for maneuver will have to make steep cuts in valuation to attract new capital.
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