How investors in late-stage tech startups can still get strong returns – TechCrunch

It was last year. A record 12 months for the tech industry, with huge amounts of money flowing into both early and late-stage companies, as well as an all-time high number of IPOs. But 2022 seems to be exactly the opposite.

This year proved that there is always risk in any investment, be it public stocks or private startups. While many people have allowed themselves to be blindsided by those risks over the past couple of years, ups and downs are natural and should be expected.

Still, there are ways to reduce risk when investing in late-stage companies. For investors, now is a good time to start looking at opportunities while also protecting themselves from potential risks.

How is it influencing late-stage tech startup valuations?

Technology companies – private and public – have seen strong corrections in their valuations. Some companies that have gone public in the past year or two have lost more than 75% of their value.

Here’s how things have changed for companies across all sectors:

Image Credits: Secfi

With even high-growth companies seeing their values ​​halve or worse, it’s no surprise that private equity investors and venture capitalists are reducing capital deployments, especially to late-stage companies.

Many of these companies have been forced to delay their IPOs until the market stabilizes and they need to conserve cash and extend their runways longer than they thought. Some have lowered their valuations ahead of future IPOs to respond to these market corrections or to attract investors.

Many tech startups can still outperform the lower market.

The current market is impacting high growth companies that are consistently losing money very hard. But it rewards those who prioritize profitability, which is why many companies cut costs and expenses.