By now its no longer news that the Great SIlicon Valley party-like-its-2000 Unicorn rally is now officially stuck in the mud. Not in free fall, just stuck at stall speed.
Its true that valuations had gotten a little, umm, stretched, if you will.
Some of the froth is finally blowing off the top.
And as always, when the music stops, we find out who is left holding the bag.
In this case, we have various mutual funds taking significant losses on their late-stage investments, with Fidelity taking top prizes for write-downs.
But given these mutual funds manage massive funds (Fidelity manages a staggering $2,074 billion! ) whatever losses are incurred should be nothing more than a rounding error.
Square, which just IPO'd below its last private round, is perhaps the poster child of the new normal. Still, even at a $3 Billion valuation, Square is an amazing success story. And apparently all classes of investors made money even at the lower cap. And lets not forget it received a nice pop on the first day though its now trading at $12.1 for a roughly $4 Billion Market cap.
Fundamentally, what we're suffering from is the hangover from a period of absurdly heightened expectations.
Over at the even more illustrious startup Airbnb, it reportedly raised $100 million at a $25.5 billion, same as last time. i.e. a flat round.
And as a twitter user humorously noted:
"Flat rounds may be the new up round"
Furthermore, with the odds of the Fed raising interest rates in December rising, it appears that the inevitable correction in the markets has been on the cards for a while.
Still, the influx of down rounds has been some sort of surprise, even for those who had long raised eyebrows on the ceaseless march of valuations upwards.
In closing, I found this quote from the CEO of floundering startup LivingSocial:
"Valuations are one of those things that are in the eye of the beholders" Mr Thakar pontificated.