Investment Highlight: Are Public Companies Damaging Private Markets?

Happy Chinese New Year & Welcome to the 1st Day of Black History Month. Don't worry if you're not feeling celebratory. It is, after all, the start of the shortest month of the year, with the most dismal weather and the highest daily rate in your rent or mortgage payment. Still, we're closer to the first day of Spring than the start of Winter (meteorologically).

Has the Bubble Burst?
The year 2021 set the record for global capital raised at $643BN, more than doubling 2020's previous record. With all that money flying about, and competition from nontraditional investors pushing valuations and funding rounds higher and higher, there has been much speculation about whether we might have reached another tech bubble. The recent stock market volatility and tech-stock sell-off have led many to believe the bubble has indeed burst, at least for late-stage investments.

What's next for dealmaking?
A factor in favor of the enormous investments and outsized valuations over the last year has been the unbeatable performance of public tech companies. Now that the NASDAQ is already down 15% in the new year, investors are seeing valuations through less rosy-colored glasses. Expect to see down-rounds in late-stage deals (where valuations are lower than or equal to previous funding rounds) and companies scrapping plans to go public. 

Who will be victorious?
Still, some companies have managed to secure huge raises already this year. Swiggy, the Indian food delivery startup, raised $700MM at a $10.7BN just last week. Crypto-asset platform Fireblocks raised $550MM to reach an $8BN valuation after quadrupling its customer base in 2021. The lesson in all this dealmaking, if there is one, is that good business models and wise financial decision-making are always the safest bet.