VCs about to learn a hard investment lesson

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The role played by crossover funds that invest in public tech stocks and private start-ups is worrying venture capital leaders from Silicon Valley to Australia.

Tiger’s spree raises questions about how any investor can make so many decisions in such a short space of time and maintain high due diligence standards. But right now, the biggest question is what might have happened to the valuation of Tiger’s private start-up portfolio.

The consensus is that the tech wreck on equity markets – where almost half of companies on the Nasdaq have fallen 50 per cent or more from their 52-week highs – could take between 12 and 18 months to flow through to start-up valuations. One senior Australian VC investor says even though the tone of board meetings at investee companies is obviously radically different from the second half of 2021, when start-up valuations were frothy, there has also been a distinct change in tone from the March quarter to the June quarter.The basic message now is that start-ups need to pull in their horns – be a little less aggressive about growth and a little more focused on conserving cash and proving the sustainability of unit economics .

 

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