June 29, 2022

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Stress affects startups.  Now venture capital firms think it's hard to raise money

Stress affects startups. Now venture capital firms think it’s hard to raise money

Recession fear and the specter of inflation sent the stock market reeling, with technology companies hardest hit by the decline.

Now, too, it doesn’t look like unlisted companies will fully escape the turmoil. According to US-based analysis firm Pitchbook, there were significant differences in valuations between the listed and unlisted markets, which analyst Andrew Akers believes will be “hard to ignore anymore.”

This may mean that the period of wildest valuations of startups may be over.

Siri Calvig is president of the Nysnø State Climate Investment Fund, which invests in unlisted companies. I also noted the uncertain overall picture, especially so marked by the war in Ukraine:

The short-term effect is that it can be more difficult. But it is important to be able to wear both short and long glasses. In the longer term, the current situation underscores the huge need for green value chains, Calvig tells DN.

Tek shares crash on the stock exchange

In the US, the high-tech Nasdaq has entered a so-called “bear market,” defined as a fall of more than 20 percent from a recent peak.

And despite the fact that the energy-rich Oslo Stock Exchange has weathered it well during the turmoil, its tech-oriented younger brother Euronext Growth has blown hard. Tech companies Link Mobility, Airthings, Huddly and Pexip are among the companies that have halved their market value in just a few months.

– We noticed it was pretty tempting to include for a while. It is a source of capital that suits many, and at the same time there may have been some of those who went to the stock exchange who were not quite mature, Calvig believed.

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Sharp tech dips contrast starkly with the mood that has reigned tech companies during the pandemic. Then several tech stocks soared, and at the same time, a flood of capital swept through unlisted Norwegian startups.

It usually takes some time before volatility in the listed market reaches the unlisted market. However, we’re seeing trends toward greater price sensitivity as well in the unlisted market, Calvig believes.

according to Norwegian Venture Capital Association As many as NOK 67.7 billion were invested in Norwegian companies in 2021. This is the highest amount the association has ever recorded, and it has led to record high valuations, especially for Norwegian technology and crypto companies.

DN recently wrote that crypto firm Presail raised 14 million NOK after four months. Another crypto company, Dune Analytics, managed to obtain unicorn status – a billion dollars worth – just 3.5 years after its launch.

The wonderful founder, Magnus Wanberg He is among those who have criticized the hysterical assessments that have characterized the tech industry.

– It’s not rational, he told DN in January.

Heavy titles

Great interest in early stage companies has led to the creation of many new investment funds.

Tom Evan Mortensen manages venture capital for new venture fund Sandwater, and doesn’t think entrepreneurial companies won’t be affected by the market turmoil.

– There can be many heavy titles. Entrepreneurs will also be affected by this wave. Investors are more cautious. There will be less noise, Mortensen says, but underlying growth will continue.

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He does not hide the fact that many companies have received very high multiples without substantiating more than the high expectations of high growth.

Complications are on the way down. Good companies will continue to receive funding, Mortensen says, while lower quality companies will be affected.

Tom Evan Mortensen works for new investment fund Sandwater.

Tom Evan Mortensen works for new investment fund Sandwater. (Photo: Sandwater)

The multiplier is a key number to help you determine if a stock is cheap or expensive. There are many different main characters you can count on. The most common is p/e (price to earnings), which is the stock price divided by earnings per share.

Although valuations may be on the decline, Mortensen states that prices are still at historically high levels.

Difficult to raise capital

He doesn’t think investors will now turn away from tech companies.

Many investor groups have opened their eyes to growing companies, and this may have helped drive up valuations. On the sidelines there are many new funds, successful reinvestment entrepreneurs, family businesses and large corporations setting up their own mutual funds.

Raising capital may be more difficult for many, but many investors and funds have a lot of available capital, Mortensen says.

Meanwhile, US startup accelerator Y Combinator recently stated that “the poor performance of listed tech stocks is significantly impacting venture investment,” while warning that it may be difficult for venture capital funds to raise money in the future.

And in a report from the first quarter of this year, CBinsights concluded that The investment projects market calms down after the “hot” 2021.

Sandwater manages $650 million, but aims to raise 1 billion kroner with capital from Norwegian and international investors.

In Norway, we have a great starting point with a strong talent base. We’ve been good at technology historically, and we have good conditions to be involved in the green transition and in health technology,” Mortensen says.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.