Tags: dot-com | venture capital | technology | IPO

WSJ: Tech Startups Are 'Like Walking Dead' as Cash Dries Up

WSJ: Tech Startups Are 'Like Walking Dead' as Cash Dries Up

By    |   Monday, 24 April 2017 12:08 PM

Call it the Dot-Com Bust 2.0.

Tech startups that raked in billions of investor cash as recently as two years ago are now facing harder times as easy financing grinds to a halt.

Investment in fledgling companies plummeted by 30 percent in dollar terms last year from a year earlier, according to data cited by The Wall Street Journal, even as venture capital firms raised $44 billion in fresh capital. Unlike a few years ago, investors today are much pickier about who gets funded.

“There are companies that everybody wants to invest in, and there are a large set of companies that almost nobody wants to invest in,” Keith Rabois, an investor at Khosla Ventures in Menlo Park, Calif., told the newspaper.

More than 5,000 U.S. tech startups together raised about $75 billion in 2014 and 2015, the most since the dot-com boom of the late 1990s. Much of those funds went a handful of startups: 294 companies raised at least $50 million each, according to the WSJ.

But three of four of those companies haven’t raised more money or been bought out since the end of 2015, leaving investors without an exit plan or a big payday that comes with an initial public offering.

As for companies that are burning cash: “They’re like the walking dead,” David Cowan, a partner at Bessemer Venture Partners, told the WSJ.

The newspaper lists several companies that have pared back operations or closed entirely because their business model didn’t take off: mobile search provider Quixley Inc., health-benefits broker Zenefits, blogging platform Medium and used-car dealer Beepi Inc.

Initial public offerings fell by more than a third in 2016 from the prior year, Reuters reported. One-fourth of the 102 companies that made their debuts last year traded below their IPO price, according to Renaissance Capital, which manages IPO-focused exchange-traded funds.

Snap Inc., which runs the Snapchat mobile app, last month sold stock in a $3.1 billion public offering. The stock started trading at $24 a share and fell 9 percent to about $21.18 a share by mid-day April 24.

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Call it the Dot-Com Bust 2.0.Tech startups that raked in billions of investor cash as recently as two years ago are now facing hard time as easy financing grinds to a halt.
dot-com, venture capital, technology, IPO
347
2017-08-24
Monday, 24 April 2017 12:08 PM
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