The -is-over/”>pandemic trade ended recently. The COVID-induced boom that propelled a number of tech companies is also fading fast. The results are showing in Big Tech’s earnings. For startups, this is bad news – the good times of the last few years appear to be on a rapid decline, with many startups maintaining speculative valuations and more fledgling than impressive earnings.
The question before us is simple: the investment dynamics of the venture capital market can slow down to the point where startup valuations (expectations, essentially) reach parity with valuations of potential exits (forecasts, essentially) before many companies do. of young technology are priced in advance. Are mid-2021 departures still possible?
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Warning signs are piling up, and we’re not just talking about a changing monetary environment, although that matters. We’re seeing tech companies in public markets struggling to meet investor expectations of future growth across multiple categories.
Social media? I am trying. Fintech? I am trying. Content streaming? I am trying. Negotiation? I am trying. The major industries that spawned a string of high-priced startups are facing a market where their public competitors are guzzling water faster than the bulls can pay.
And the damage could be even worse. After all, we haven’t even started the monetary tightening expected for the rest of the year. This is just the beginning.
Facebook stock is down about 25% this morning, cutting about $200 billion off its market value. The Nasdaq Composite was down 1.8% as a whole. Cloud shares fell 1.6%. Snap shares are down 19%. After dropping from around $175 a share to around $130 yesterday, PayPal is down another 4% this morning. Spotify shares are down 17%. Fintech stocks, depending on the index you choose, are down more than 2%.
all this after we’ve seen the December sell-off through the new year in the value of software companies. It’s an altered landscape.
Why? Investors have rated a number of companies as if their pandemic is more like their new reality. However, it turns out that much of the growth of the pandemic has not been free – it has come at the expense of later growth. In terms of dork, revenue and user growth were not generated in the midst of COVID-19, but pulled forward. This led to great results in the short term, but slower growth in the medium term, as companies had already eaten their second and third courses during the pre-dinner drinks portion.