San Francisco – The start financing is falling for the first time in three years.
The numbers are grim. Investments in American tech startups have fallen by 23 percent to $ 62.3 billion in the last three months, the strongest decrease since 2019, according to figures released on Thursday by PitchBook, that young companies are following. Even worse, in the first six months of the year, the sale of start -ups and stock market introductions – the most important ways in which these companies return money to investors – fell by 88 percent, up to $ 49 billion, compared to a year ago.
The falls are a rarity in the startup ecosystem, which had more than a decade of outdoor growth growth, fueled by a thriving economy, low interest rates and people who use more and more technology, from smartphones to apps to artificial intelligence. That increase now produced well -known names such as Airbnb and Instacart. Over the past decadeThe quarterfish financing on fast-growing start-ups only fell seven times.
But since rising interest rates, inflation and uncertainty as a result of the war in Ukraine have thrown a damper on the global economy this year, Young technology companies have been touched† And that predicts a difficult period for the technical industry, which depends on start-ups in Silicon Valley and beyond to deliver the next major innovation and growth motor.
“We are in a long bull market,” said Kirsten Green, an investor at Forerunner Ventures, adding that the relapse was partly a reaction to that crazy period of dealing, as well as to macro-economic uncertainty. “What we are doing now is to calm things down and take part of the noise away.”
The startup industry still has a lot of money and a collapse is not next. Investors continue to close and finance 4,457 transactions in the past three months, an increase of 4 percent compared to a year ago, according to PitchBook. Venture capital firms, including Andreessen Horowitz and Sequoia Capital, still recruit large new funds that can be used in young companies, and collect $ 122 billion in commitments this year, Pitchbook said.
The state of the stock market
The fall in the stock market this year was painful. And it remains difficult to predict what the future awaits.
Start-ups are also used to the boy who cried the wolf. In the past decade, various blips in the market have led to: predictions that technology was in a bubble that would crack quickly† Every time the technology fell back even more and more money came in.
Yet the warning signals have not been more prominent lately.
Venture capitalists, such as those of Sequoia capital and Lightspeed Venture partners, young companies have warned to save costs, save cash and prepare for difficult times. In response, many start-ups have dismissed employees and personnel stops. Some companies, including the payment start-up fast, the home design company Modsy and the travel start-up Wanderjaunt, are closed.
The pain has also reached young companies that have gone to the stock exchange for the past two years. Shares of one-off starting favorites such as the shares app Robin HoodThe ScooterStart-Up Bird Global and the Cryptocurrency exchange Coinbase have fallen between 86 and 95 percent under their highlights of the past year. Enjoy Technology, a retail start-up that went to the stock market in October, applied for bankruptcy last week. Electric Last Mile Solutions, a start-up for electric vehicles that went to the stock market in June 2021, said last month that it would liquidate its assets.
Kyle Stanford, an analyst at PitchBook, said that the difference this year was that the huge controls and rising valuations of 2021 did not take place. “They were untenable,” he said.
The start -up market has now ended up in a kind of stalemate – especially for the largest and most adult companies – which has led to a lack of action in new financing, said Mark Goldberg, an investor at Index Ventures. Many starting founders nowadays don’t want to raise money at a price that appreciates their company lower than it was ever worth, while investors do not want to pay the high prices of last year, he said. The result is a standstill.
“It’s almost frozen,” said Mr. Goldberg.
Moreover, so many start-ups have collected huge piles of money during the recent boom that only had to raise money this year, he said. That could change next year, when some companies have almost no money anymore. “The blockade will break at some point,” he said.
David Spreng, an investor at Runway Growth Capital, an investment company for venture debts, said he had seen a divorce between investors and start-up executives about the state of the market.
“Almost every VC lets alarm bells ring,” he said. But, he added, “the management teams we talk to, they all seem to think: it will be fine, no worries.”
All he has seen every company do, he said, is hiring staff freezing. “If we start seeing that companies are missing their sales goals, it’s time to worry a little,” he said.
Nevertheless, the enormous amounts of capital that venture capital companies have collected to support new start-ups have given many in the sector the confidence that it will prevent a large collapse.
“When the crane opens again, VC will be set up to get a lot of capital back to work,” said Mr. Stanford. “If the broader economic climate does not deteriorate.”
