Private Startups Dragged Down by Tech Stock Sell-Off

A sell-off in public tech companies has caused startup shares to sink, Financial Times wrote Sunday (April 17).

Forge Global, a venue for trading in private startups, said the prices of companies on its platform fell 19.9% in February and March, compared with Q4 of the prior year. Furthermore, Zanbato, a private share trading platform, said its index tracking of over 100 of the most widely traded private companies had fallen 1% in the first quarter of this year.

This is similar to the middle of 2020, which was the last time there was a negative quarter on the index, spurred by the months-old pandemic. The data also shows that investors are getting cold feet after a bumper year of investing, which helped lift up several startups.

According to Nico Sand, Zanbato’s CEO, the spread between prices sought by buyers and sellers has widened in the last few months, particularly due to the volatility of the economy in early 2022.

Recently, the drops have gone along with a sell-off in public markets. While the Nasdaq Composite slid around 15% this year, some of the biggest tech listings from last year, including eCommerce company Coupang and carmaker Rivian, have fallen even more.

Zanbato’s market price for shares in the online conferencing startup Hopin was also down 40% in the first quarter as the company had some layoffs. This followed that company having a lot of growth during the pandemic.

Zanbato reportedly calculates the index values based on completed trades and legally binding buy and sell orders.

PYMNTS wrote that chief financial officers’ (CFOs’) jobs have been changing as of late, with the controllers’ roles shifting from making sure the books get closed on time to essentially becoming a “chaperone for investment dollars,” according to Sprinklr CFO Manish Sarin.

See also: Today’s CFO Is a ‘Chaperone for Investment Dollars’

Sarin said CFOs are now expected to determine where the company should invest, articulate the reasons to investors and explain the incremental return that will happen.

“The best way to think about a CFO’s role is you need to be able to convince your colleagues to see things your way, you need to go sell the vision to Wall Street, you need to set all the controls internally to make it all happen, and you need to have a crystal ball that better be very clear in terms of what you’re telling investors and what’s happening internally,” Sarin said.