Venture-capital investors hit the brakes on investing in the first quarter, following a funding bonanza the past two years that pushed valuations of once-hot technology startups to soaring heights.
Funding for U.S. startups fell 25% from the fourth quarter to $13.9 billion, the largest quarterly decline on record since the dot-com bust, according to data from Dow Jones VentureSource. The numbers of deals also hit a four-year low of 884.
The drop threatens to hasten a slump rippling through Silicon Valley that is pushing startups to slash marketing budgets, lay off staff and dial back lofty ambitions. Investors such as mutual funds and big banks that pumped money into startups on the promise of big returns have since retrenched, as a punishing market for initial public offerings has spoiled the runaway optimism.
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A frozen IPO market for new tech issues in the first quarter has posed problems. Not a single venture-backed tech company went public in the first quarter, the first time that has happened in the past seven years. The darkening mood in the public markets, through which venture capitalists cash in their investments via IPOs, is forcing them to acknowledge that private market valuations got out of hand.
Curated from Startup Investors Hit the Brakes [WSJ]
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