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Tech sell-off: record fundraising has given start-ups breathing space

Investment in technology companies stops when valuations fall. Technology stocks are dragging markets down, pushing the Nasdaq down 24 percent this year. Snap stocks have crashed two-thirds and Amazon nearly two-thirds. But startups still have reason to hope.

Forecasters believe that the demand for the technological products and services they provide will increase this year. Despite rising inflation and geopolitical disruption, Gartner did 4 percent increase contract Global spending on IT services and products to $ 4.4 billion. Analytics, cloud computing and security groups should be most helpful.

shrewd Startups Revaluation of their expenses during the plague. In March 2020, venture capital firm Sequoia warned founders to think carefully about their cash flow, number of employees and capital expenditures.

But the biggest defense is fundraising. In the first quarter of 2022, global start-ups raised a record amount, according to the latest data from CB Insights. Investment in blockchain start-ups alone reached $ 9 billion in the first three months of the year.

PitchBook statistics record a year-over-year decline in U.S. venture capital investment in the first quarter of $ 70 billion. But Investments during 2021 were $ 330 billionDouble the amount in 2020 and four times five years ago.

The abundance of financing will help technology companies in a time when the main markets are closed or open only under adverse conditions.

Companies that joined the markets last year, including Fintech Coinbase, Robin Hood, Toast and rocket, are trading well below their listing price. Prices may fall even further. Valuations remained high despite the sale. Schiller’s price-to-earnings ratio, also known as the cyclically-adjusted P / e (CAPE), fell this year. But at 32 it is still twice the historical average.

So far, start-ups are showing signs that they should not try forced listings in the market to raise funds. Over a three-month period, global markets saw only 321 initial public offerings – down more than a third from the same period last year, according to EY. By raising money from private marketers when they can, start-ups have bought themselves time.

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Tech sell-off: record fundraising has given start-ups breathing space Source link Tech sell-off: record fundraising has given start-ups breathing space

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