Technology Startups See Private Market Valuations Plunge
As market values of technology startups have collapsed this year amid a venture capital drought, the declines have been exacerbated by laid-off Silicon Valley workers selling stakes in their former firms.
Tech start-ups reliant on venture capital and wealthy tech investors have had to recalibrate growth plans as that funding has plunged, the Financial Times reported earlier this year. In addition to finding other sources of financing, many startups have begun laying off workers as they try to conserve cash.
By itself, the capital funding drought pressured start-up market values. Now those values have fallen even further as laid-off workers sell. Some of those workers, depending on their vesting and/or ownership agreements, have had little choice but to sell, often within 60 days of their departure date.
Rainmaker Securities, which tracks private market transactions, said such sales occurring in the secondary market have come at prices 30-85% lower than late last year.
The declines mirror those of tech giants Amazon and Meta, whose shares investors have punished by 48% and 64%, respectively, this year. Each of those firms has laid off more than 10,000 workers in recent weeks.
Klarna, Chime, and Stripe, financial technology firms whose values surged in 2021, have laid off 10-30% of their workforce in recent months. The same goes for delivery firms Instacart and Nuro.
The valuations of those firms in private secondary markets—generally illiquid markets involving arranged transactions between specific buyers and sellers, as opposed to quickly negotiated trades via public stock exchanges—have declined dramatically. The price of Stripe's share sales declined 65% from transactions that occurred in late 2021; Klarna's share
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