EquityZen's Blog On Startups and Their Economics

Public tech stocks take a hit, and that's just fine for private investors

Phil Haslett | April 18, 2014

March was not a friendly month for technology stocks, as public worry about the next 'tech bubble' pushed the entire sector into the red.
Shaky returns for Twitter, Facebook and Netflix in March 2014 (Source: Google Finance)
The mounting pressure also impacted scheduled Tech IPOs, with companies like Weibo reducing the size (and price) of their Public Offerings this week.

So what should we make of this frothiness and concern? Are we indeed heading towards a 1999-esque bubble?

The late-stage VC community certainly doesn't think so. Consider this:

In short, the cold feet of public retail investors are creating a huge opportunity for private investment funds with large coffers. If the recent downturn in public tech stocks turns into prolonged public market weariness, IPO-track companies may seek to defer their coming out party and continue to raise capital privately.  Until the public can better digest the valuations of leading technology, Tiger Global and TCV will happily invest in large, proven -- and private -- tech companies. (Note: Tomasz Tunguz, VC at Redpoint Ventures, has an excellent piece on how SaaS businesses like Box are being undervalued by the public).

Coatue Management best encapsulates this trend. The large NYC-based Technology hedge fund recently returned $2 billion to investors after they lost 9% in March. Note that this was the result of shaky public stock performance: Coatue has caught much more attention in the venture capital arena for its private investments in HotelTonight, Snapchat, and Lyft. Given the recent sea-change in public technology, they'll likely continue to do so.

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