While this year’s stock market decline was swift, it was also widespread, with very few companies escaping the downturn. But current market conditions haven’t caused the same uniform trajectory for startups.
When public-market stock prices started to fall, everyone reminded themselves that it would take a few months to see the real impact on the private market — historically a six-month lag. But data from Caplight, a fintech that looks to make secondary trading more transparent, found that late-stage startups weren’t really following a singular trend.
The sample set of startups that Caplight examined includes the 10 highest-valued venture-backed companies, including recognizable names like Canva, ByteDance and Stripe. We are focusing on the changes to the share prices at which these companies have been traded on the secondary market. Those prices are, in turn, derived from a company’s valuation set during secondary trades.
The data found that some of these late-stage startups’ valuations fell in line with the public market, while some started to drop off in 2021, before the public markets tanked, and others are still seeing their valuation creep up. While we don’t know precisely why, when and how hard each company’s valuation is getting hit — if at all — there are a few observations worth noting.
For example, Instacart. The grocery delivery behemoth reached its peak secondary share price back in September 2021, $125 a share, and has been declining since — coming in at $48.48 in September 2022, according to Caplight’s most recent data. But why did Instacart’s valuation start to go down months before the broader market?
It likely had to do with a few things, namely a change in consumer trends. Instacart was a pandemic darling, garnering a $40 billion valuation in 2021 on strong traction. As COVID vaccines became widely available and many people went back to doing things in person — and as Instacart was approaching a public listing at the time — it isn’t super surprising that its valuation started to decline months before the public market did.
To Instacart’s credit, it’s one of few startups that has been candid that its valuation is likely lower due to consumer trends and market conditions.
Instacart’s metrics show that the sector you’re in influences how your company is valued in the private markets. Other pandemic darlings in the food delivery category, including GoPuff and DoorDash, both executed layoffs this year.
This is similar to the disparities that we saw when venture deals started to decline earlier this year for seemingly every sector except crypto, which continued to raise massive sums. (Though that may soon no longer be the case.)
Beyond Instacart, when a company was supposed to exit in this year’s IPO-less environment seemed to play a big role in how its valuation fared in 2022 as well.
Chime illustrates this. The fintech, which filed in 2021 to go public in March 2022, has seen its valuation on a roller coaster leading up to — and then past — its original exit timeline. Private shares started to decline in price in February before jumping back up in March, when the company was supposedly going public, and have since declined.
In August, the latest data showed, shares were trading down 40% from their January 2022 peak. Meanwhile, some companies still seem immune to it all. While many startups’ valuations declined, ByteDance’s private share price ticked up 19% in secondary trading this year, despite numerous articles reporting that its popular TikTok application has potentially dangerous security flaws.
So, what does this all mean? Well for one, we can’t paint what will happen to late-stage companies next year with a broad brush. While almost everyone is going through it, each sector and company is on its own path.
Check back in next week for a look at how a specific, very hot sector has been faring.