The technology selloff is getting to be somewhat material - Josh Loe

The technology selloff is getting to be somewhat material


Tech stocks are getting hammered today, with previously high-flying shares of software companies taking even more damage.

For a sector that has enjoyed a year in the sun, recent trading sessions have punctured a period of market adoration. It is too soon to say that the market is repricing tech stocks, but the selloff has reached the point of materiality and is therefore something we need to note.

As we write, the tech-heavy Nasdaq Composite is off another 1.2% today after previous declines. The now-infamous ARK Innovation ETF is off 6.5% and the list of individual declines worth noting in the tech sector is very long indeed.

The change in sentiment is clear in recent results. Here’s the tech-heavy Nasdaq Composite:

  • Nasdaq Composite 52-week high: 14,175.12
  • Nasdaq Composite today: 12,561.13
  • Percent change: -11.4%

And the damage intensifies if we consider just SaaS and cloud stocks. Here’s the Bessemer cloud index:

  • Bessemer cloud index 52-week high: 2,884.23
  • Bessemer cloud index today: 2,185.62
  • Percent change: -24.2%

In more prosaic terms, the Nasdaq is in a technical correction, while SaaS stocks have reached bear-market territory. That’s quite a turnabout from recent all-time highs for both.

Not just software

Lost on the TechCrunch editing floor from late yesterday is a post we wrote noting the sharp declines in the value of insurtech stocks ahead of the impending public debut of Hippo, another neo-insurance company. The SPAC-led Hippo flotation will not touch down in a warm market. Instead, its contemporaries look like this today:

  • Lemonade 52-week high: $188.30
  • Lemonade current price: $84.72
  • Change: -55.0%
  • Root Insurance 52-week high: $29.48
  • Root Insurance current price: $12.38
  • Change: -58.0%
  • MetroMile 52-week high: $20.39
  • MetroMile current price: $10.04
  • Change: -50.8%

The damage is widespread. Hell, recent IPO success-story Snowflake announced yesterday that it grew from revenues of $88 million in its year-ago quarter to $190 million in its most recent. And its stock is off more than 7% today.

We’ll leave it to you whether the changing public valuations are just a blip or a more staid change in the winds. But it does feel different out there.

For startups, this is all somewhat poor news. Valuations for public comps were strong in 2020. To lose that halo in 2021 could crimp late-stage valuations, perhaps even reaching back to Series A and B rounds to limit some upside for growing upstarts. But such an impact will lag the public markets, so don’t expect things to change quite yet.

Still, every private investor has their eye on the exit when it comes to their deals. And if that exit is suddenly shrinking, so too might their interest in paying for quite so great a markup on their next deal.


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