Venture Firms’ Strategy of Holding Stocks for Longer Backfires During Market Rout

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Startup investors that held off on exiting investments after their initial public offerings are left to rue the decision

announced a new longer-term fund structure in the fall of 2021 that would allow it to hold shares in public companies indefinitely, arguing that it could. In addition to holding on to stock, the firm has purchased new shares in public companies including software provider Datadog Inc., public filings show, part of a broader trend among Silicon Valley investors.

Some venture firms haven’t just seen paper gains shrink, they actually lost money outright by hanging on to shares—a rarity for such investors given how early they initially acquire stakes in startups.Robinhood Marketsbeginning in 2018, according to calculations by the Journal and people familiar with the matter. The firm’s stake was worth around $175 million as of Wednesday’s market close, the Journal calculations show, translating into an $83 million loss for the firm.

Sequoia, among the most vocal venture-capital proponents of the new strategy of holding public stocks, also missed out on billions of dollars in potential gains for some of its largest stock positions, including software providerSequoia still owns the majority of its IPO shares in Snowflake, which went public more than two years ago, public filings show. Snowflake’s stock has lost roughly 65% from its post-IPO high.

 

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Nice

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