Despite a boost in funding, the market selloff is causing concern among venture capitalists.
- ByStartupStory | January 26, 2022
Following a year of record fund raising and investment, sustained drops in the prices of technology stocks and crypto currencies are causing concern among many venture capitalists. In recent weeks, prominent investors have raised concerns about a huge disparity between private and public market prices. Partners at some of the world’s most powerful tech investment firms, such as Blackstone, are among the doomsayers.
Door Dash Inc., Etsy Inc., and Zoom Video Communications Inc., among other technology businesses that thrived during the pandemic, have seen their stock prices plummet by more than 30% since November. This is driving venture investors to reconsider how aggressively they should chase deals and at what valuations they’re willing to pay.
“The markets have been overheated for a long period, so I believe the correction is healthy,” Amy Wu, the head of FTX’s bitcoin investing department, said. “Valuations in the private market have not yet been updated.”
After stimulus measures helped send technology stocks flying, rising interest rates, inflation, and the reopening of economies from Covid-19 limitations have put a damper on them. According to data firm CB Insights, venture capital deals have exploded in the last two years, hitting a record $621 billion globally last year. Major market indices, particularly the tech-heavy Nasdaq, were whipsawed on Monday
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