On the morning of April 18, Beijing time, the sell-off of listed companies in the technology industry and the suspension of new stock listings are setting off shock waves in Silicon Valley. Affected by this, the valuations of startups also fell in private transactions.
Forge Global, one of the world’s largest equity trading platforms for private startups, said valuations of companies on its platform fell 19.9 percent in February and March compared with the fourth quarter of last year.
Zanbato, another equity trading platform for private companies, said an index tracking the valuations of more than 100 of the most traded private companies fell 1 percent in the first quarter of this year. The last time the index fell was in mid-2020, when the coronavirus pandemic caused turmoil in private markets.
The figures suggest that investors are becoming more cautious about investing in private companies after a bumper year for the venture capital industry. Venture capital has pushed hundreds of young tech companies’ valuations into the billions over the past few years.
Zanbato CEO Nico Sand said the spread between what buyers were offering and what sellers were asking widened amid the overall market volatility in January and February. “Since then, as the market confirmed new clearing prices, spreads have started to emerge. This has driven up trading activity in March and early April,” he said.
The decline in share prices in the private markets coincided with the sell-off in the public markets. This year, the Nasdaq Composite is down about 15%. The biggest tech companies that went public last year, such as South Korean e-commerce giant Coupang and electric car maker Rivian, saw their shares fall even more.
Platforms like Forge allow employees, investors and other shareholders to buy and sell shares in startups before they are acquired or go public. These startups have grown rapidly with the venture capital boom in recent years, and founders often allow employees to sell stock early in the company’s development. Forge said the platform processed $3.2 billion in transactions last year.
Shares of online meeting startup Hopin fell 40% in the first quarter of this year. The company cut jobs after a period of rapid growth during the outbreak. Investors valued Hopin at nearly $7.8 billion in a funding round announced last August.
Market prices for payments company Stripe fell 4% over the same period, according to Zanbato. Investors valued the company at $95 billion last March, making it the most valuable venture-backed company in Silicon Valley.
Zanbato calculates the index based on completed trades and legally binding trade orders entered into its system, giving higher weight to completed trades. Stripe declined to comment for this message, and Hopin did not respond.
Venture capitalists have slowed the pace of deals this year. In the first quarter of this year, venture capital investment in the U.S. market totaled $70.7 billion, down from the same period last year, according to PitchBook.
However, compared to historical levels, venture capital activity remains active. Some investors said they were looking for attractive trading targets amid the market sell-off. “We see this as an opportunity, and you want to buy when the market is down,” said Hans Swildens, CEO of Industry Ventures, the most active investor in the private secondary market. one.
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