The startup world has had a tough year — plagued by mass layoffs, plummeting venture capital investment and the chaotic collapse of Silicon Valley Bank. But many in tech believe that the worst is yet to come.
As the market downturn drags on and investor cash remains hard to come by, more startups will start to run out of money, experts say. Some venture-backed companies will be forced to raise new funding even if it means agreeing to a lower valuation than they once secured, a deal called a down round, dreaded by founders and investors alike.
“We haven’t had a compression in values like this in more than 20 years. It’s an absolute bloodbath,” said Cameron Lester, global co-head of technology media and telecom investment banking at Jefferies, adding that companies that are able to raise money, even at a lower valuation, are the lucky ones. “What matters is you’re a survivor,” Lester said.