It’s been a historic decade for tech startups, but all good things must come to an end… 

We’ve seen a huge bull market for tech startup investments that started around thirteen years ago and was further exacerbated by the Covid-19 pandemic that was also partially responsible for sending many tech names into the stratosphere. 

To name a few, companies like Zoom Video Communications, Inc. (NASDAQ: ZM), Peloton Interactive, Inc. (NASDAQ: PTON), and Amazon Inc. (NASDAQ: AMZN) all saw record runs to all-time highs during the peak of the pandemic. And while these aren’t tech startups they are publicly traded companies that can easily show the huge runs that tech names went on to round out the decade. 

And while the broad market experiences its fair share of turmoil, there’s a painful reversal happening in tech startup investing that is undoing the fortunes of many founders and investors.

Startups with stratospherically high valuations have gotten a swift reality check by the current climate. Tech startups across the board have been rife with layoffs, suspicious investors, a departure of funds, and valuation trimming.

As a result, many venture capital firms have seen their startup-heavy portfolios decline. 

This past Thursday, SoftBank Group Corp. reported a $26.2 billion loss on its big portfolio of technology companies for the first three months of the year. Pretty rough… 

The pain doesn't stop there, either... According to the financial data company PitchBook, venture capital investments fell 26% in this year’s first three months following the Q4 2021. 

The more I read about this, the more I see the comparison to the dot-com crash from two decades ago. But I don’t think that’s what we’re seeing here… 

Sure, venture capital firms and individual investors were throwing money at tech names left and right, some that didn’t even have much to do with technology but were labeled as such anyway, and those companies are starting to experience troubles. 

But that’s what happens when you throw unlimited money at companies that are just getting on their feet. 

Facing mounting pressure to grow, many startups began feverishly adding staff and making acquisitions. When that happens, it’s not uncommon to see the quality of work deteriorate. Some acquisitions weren’t thought out, distracted leadership burned too much cash, and the list goes on. 

I know this has sounded pretty negative so far, but there’s a silver lining… While it’s true that not all tech companies are created equal, technology is forever. There will always be a need for technological developments that increase the quality of life for people around the globe. Not every startup will survive, but the startups that survive will do so by no mistake. 

The tech market has proved its resilience time and time again, and I don’t think now is any different. Some of these troubled tech startups can alleviate a lot of issues by simply reigning in frivolous spending. More thoughtful hiring and acquisition can go a long way too. Money changes the way people think and make decisions, with less to play with leadership will have to act much more strategically to make the most of their limited dollars. 

This should lead to more solid decision-making and ultimately translate to a more profitable bottom line. 

So don’t count tech out just yet, I believe there is plenty more room to run. 

To a bright future,

Ray Blanco
Chief Technology Expert, Technology Profits Daily
AskRay@StPaulResearch.com