Startup workers arrived in 2022 expecting another year of initial public offering of cash. Then the stock market plummeted, Russia invaded Ukraine, inflation soared, and interest rates soared. Instead of going public, startups began cutting costs and laying off employees.
People also started dumping their startup stocks.
Phil Hasslet, founder of EquityZen, said the number of people and groups trying to take off their startup shares has doubled since late last year. He said shares of some billion-dollar startups, known as “unicorns”, have fallen by 22% to 44% in recent months.
“This is the first consecutive return to the market that people have seen legally in 10 years,” he said.
It’s a testament to how the startup’s passion for making easy money has waned over the past decade. Every day, headlines about another round of job cuts startups warning of a downturn on social media. And what was once seen as a surefire way to amass wealth – owning a startup stock – is now seen as a responsibility.
The turn has accelerated. In the first three months of the year, venture funding in the United States fell 8 percent to 71 71 billion from a year earlier, according to Pitchbook. In contrast, at least 55 tech companies have announced layoffs or shutdowns since the beginning of the year. According to Layoffs.fyi, this time last year 25, which monitors dismissals. And IPOs, the primary method of initially cashing out, fell 80 percent as of May 4 from a year earlier, according to Renaissance Capital, which follows the IPO.
Last week, Cameo, a celebrity noise-out app; On the deck, a carrier services company; And MainStreet, the start of a financial technology, all laid off at least 20% of its employees. Fast, a paid start, and Halcyon Health, an online healthcare provider, shut down abruptly last month. And grocery delivery company Instacart, one of the most valuable startups of its generation, cut its valuation from 40 40 billion last year to 24 24 billion in March.
“Everything that has come true in the last two years is not suddenly true,” said Matthias Schilling, a headline venture capitalist. “Growth at any cost is not enough.”
The startup market has experienced similar moments of fear and panic over the past decade. Each time, the market roared back and set a record. And there’s enough money to keep losing companies: According to Pitchbook, venture capital funds amassed a record 13 131 billion last year.
But what is different now is the confrontation of troubling economic forces and the realization that the startup world has to account for the obsessive behavior of the last few years. A decade-long race of low interest rates has enabled investors to take big risks on high-growth startups. The war in Ukraine is causing unexpected macroeconomic waves. Inflation is unlikely to ease any time soon. Even big tech companies are faltering, with shares of Amazon and Netflix falling below their pre-epidemic levels.
“Every time we say it feels like a bubble, I think it’s a little different,” said Albert Wenger, an investor at Union Square Ventures.
On social media, investors and founders have released a constant drum beat of dramatic warnings comparing negative emotions. .Com crashes in the early 2000’s And emphasizing that pullback is “real.”
Even Bill Gorley, a Silicon Valley venture capital investor who was tired of warning startups over the last decade about bubbly behavior, has returned to form. “The process of ‘non-learning’ can be painful, shocking and disturbing for many people,” he said. Written In April.
Due to uncertainties, some venture capital firms have stopped making deals. D1 Capital Partners, which participated in about 70 startup deals last year, told the founders this year that it has stopped making new investments for six months. The firm said any deal was announced before it was suspended, with two people saying they were aware of the situation and refused to identify it because they were not authorized to speak on the record.
Other venture firms have devalued their holdings to meet falling stock markets. Sheel Mohnot, an investor in Better Tomorrow Ventures, said his firm had recently slashed the prices of seven of 88 startups, the largest investment in a quarter so far. ۔ The change was more pronounced than a few months ago, when investors were urging founders to take more money and spend it to grow faster.
Mr Mohannot said that this fact had not yet come to the notice of some businessmen. “People are not aware of the scale of the change that has taken place,” he said.
Traders face whiplash. Knock, a home loan startup headquartered in New York City, expanded its operations from 14 cities to 75 in 2021. The company plans to go public through a special purpose company, or SPAC, valued at $ 2 billion. But as the stock market rocked the summer, Nook canceled the plans and offered to sell himself to a large company, which he refused to disclose.
In December, the recipient’s stock price fell by half and the deal was terminated. Knock finally raised 70 70 million from its existing investors in March, laid off about half of its 250 employees and added 150 150 million to a deal worth just over 1 1 billion.
Founder and chief executive Sean Blake said that during the roller coaster year, Knock’s business continued to grow. But many investors did not care.
“It’s frustrating to know as a company that you’re crushing it, but they’re reacting to whatever it says today,” he said. “You have this amazing story, this amazing development, and you can’t keep up with the pace of this market.”
Mr Blake said his experience was not unique. “Everyone is going through it quietly, embarrassingly, embarrassingly and not willing to talk about it,” he said.
Matt Burnbam, head of talent at venture capital firm Pierre VC, said companies need to carefully manage workers’ expectations around the value of their start-up stock. It foreshadowed a vain awakening for some.
“If you’re 35 or younger, in technology, you’ve probably never seen the down market,” he said. “What you’re used to is your whole career right and right.”
Between the heights of the last two years, emerging public startups are pushing the stock market, even beyond the overall tech sector. Shares of Coinbase, the cryptocurrency exchange, have fallen 81% since its inception in April last year. Robinhood, a stock trading app that has seen explosive growth during epidemics, is trading 75% lower than its IPO price. Last month, the company fired 9% of its staff, accusing them of excessive “hyper-growth.”
SPACs, which in recent years have been an innovative way for very young companies to go public, have performed so poorly that some are now re-privatizing. SOC Telemed, an online healthcare startup, went public in 2020 using such a vehicle, valued at $ 720 million. In February, an investment firm, Patient Square Capital, bought it for about ً 225 million, a 70% discount.
Others run out of cash. Canoe, an electric vehicle company that emerged in late 2020, said on Tuesday it had “considerable doubts” about its ability to stay in business.
Blend Labs, a financial technology venture focused on mortgages, had نجی 3 billion in the private market. Since its launch last year, its value has sunk to 1 billion. Last month, he said he would cut 200 workers, or about 10 percent of his staff.
Blend’s president, Tim Mayopoulos, blamed the cyclical nature of the mortgage business and the sharp decline in refinancing, coupled with rising interest rates.
“We are looking at all our expenses,” he said. “High-growth cash-strapped businesses are clearly not in favor of investor sentiment.”