(Bloomberg) – Hedge funds have become recently picky when it comes to technology startups. They had previously helped the reviews exaggerated to a level that could rival the dot-com era.
involved in last month hedge funds to so few venture capital rounds of US technology companies like since no longer in 2013 – with just two transactions. This is evident from data from market researcher Pitchbook Data Inc. out.
Even Tiger Global Management LLC, an early supporter of Facebook and LinkedIn with assets under management of 20 billion dollars, returns its own commitment. Smaller companies grow even completely.
Behind the caution of hedge funds is the fact that last Startups could not keep their promises. In addition, some companies have in the face of disappointing tech IPOs held longer to renounce their IPO – which for investors means that they have to wait for possible gains longer.
The reluctance of hedge funds and other investors is forcing startups to reduce the cost to put staff on the door and from stricter conditions when gathering engage financial resources.
“We have completely stopped doing to invest in non-listed tech companies,” says Jeremy Abelson, portfolio manager at Irving Investors, a small hedge fund in New York. “I’m through with non-tangible reviews, unknown exits, unknown liquidity. I want my money now stuck in something in which I do not necessarily achieved a lottery win, but that immediately yields a return.”
between the third and fourth quarter of 2015, hedge funds have involved 38 percent less global transactions with venture capital backing showing Pitchbook data. The total volume of completed deals was therefore in the period of 9.1 billion to $ 4.6 billion US dollars back.
The tech firms who probably not developed as hoped after its IPO, one the of Esty Inc. the company lost since the IPO a year ago, almost half of its market value.
Square Inc. and Match Group Inc. rallied their IPOs less money than expected. The issue price of Square of nine dollars per share was among those $ 15.46, which had been made in the last private financing round before the IPO. The title of Match are currently trading below their issue price.
According to data from Irving Investors tech investors were in 2013 an average yield of 160 percent between the last private financing round and IPO expected. In the second half of 2015, the average income therefore fell to 29 percent.
Large hedge funds have but US tech startups by no means completely turned their backs, they are only become more cautious. Tiger Global Management, which describes itself as an investment fund with a separate venture division, realized in 2015 a total of four US investments – compared with twelve a year earlier, as evidenced by statistics from CB Insights
“This is not a liquid asset class,” says Ilan Nissan, a partner at Goodwin Proctor, a consultant to hedge funds and venture capital funds. “You have to be willing to sit out there and not be able every day to know the value. Since the IPO market is moving sideways, it makes sense for them to refrain from these assets class.”
© 2016 Bloomberg LP
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