Startup Valuations Slashed as Investors Snip Purse Strings Amid Market Losses

The gravy train for startup valuations could be coming to a stop as worried investors snip purse strings amid market losses and underperforming initial public offerings (IPOs).

“It’s harder to raise today than it was six months ago,” CEO of startup Mozart Data Peter Fishman told the Wall Street Journal. “It is a pop of irrational exuberance.”

Startups were rolling in millions and billions of investment dollars in fast-moving deals that catapulted them to stock market listings that initially took off. Many tech stocks saw valuations spiral downward, sinking below initial IPO prices, rattling investors and Wall Street.

See also: Early-Stage Startups Funding Surge Stokes Concerns Over Valuation, Business Worth

U.S. startups were worth a combined $4.5 trillion at the end of 2021, nearly double the pre-pandemic valuation, according to PitchBook data.

Dampened enthusiasm by investors is spreading, likely to trigger a reduction in IPOs, which in turn will dry up funding for some startups and hamper valuations, venture capitalists said, per the WSJ. VC companies are advising their firms to hang on to cash in what is portending to be a chilly funding landscape.

One example is Tiger Global Management, a big backer of startups in the past two years. It’s reportedly been talking with several startups about dropping valuations, sources told WSJ. VC have said that others are following suit. Some venture capitalists are telling startups planning upcoming IPOs to change their timelines.

Read more: Study: Tech Unicorns Overvalued By Nearly 50 Percent

Jared Carmel, managing partner at Manhattan Venture Partners, a startup investor and adviser to venture-backed companies and their shareholders, told WSJ he watched prices for certain stock purchases of some private companies fall 10% in the past month.

While some investors and startup founders are optimistic the situation could turn around, others are bracing for the worst.

“If inflation persists beyond a rate hike or two, we will see a larger correction,” Keith Rabois, a partner at Founders Fund and early investor in DoorDash and Airbnb, told the WSJ.