A FAVOURITE PASTIME in Silicon Valley, second only to inventing the next new thing, is bubble-spotting. Even industry insiders tend to get these things spectacularly wrong. “You’ll see some dead unicorns this year,” Bill Gurley, a noted venture capitalist, predicted in 2015, the year that incubation of these startups worth more than $1bn really got going.
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The game has just become much easier: the sound of bubbles popping can be heard all over the place. Tech shares, initial public offerings (IPOs), blank-cheque companies (known as SPACs), startup valuations and even cryptocurrencies: all the assets that climbed to dizzying heights over the past few years are now coming down to earth. It is harder to say how loudly they will burst—and which might still reflate.
The decline of tech shares is the most spectacular. The NDXT, the index of the 100 largest tech firms on the Nasdaq exchange, is down by a third since its peak in early November. Firms in this index have lost a combined $2.8trn in market value.
High-flying startups that went public in recent years have been hit hard, too. The shares of Robinhood are 80% below the level at which the retail-trading app went public in July 2021. Those of Peloton, which makes internet-connected exercise bikes, have lost over 90% of their value from their peak. As a group, the largest newly listed firms are worth 38% less than at the start of the year (see chart).
Small wonder that IPOs have dried up. From January to April 2021 some 150 companies went public in America, most of them techie. This year only 30 have done so. The boom in SPACs, which go public and then find a startup with which to merge, has imploded. Of the more than 1,000 such firms that have floated in America since 2018, only a third have merged with a target. Many of those that have done deals have lost their shine. According to an index that tracks the 25 largest de- SPACed vehicles, they have lost 56% of their value since the beginning of the year.
As tech shares crash, they are pulling valuations of private firms down with them. CB Insights, a research firm, reckons that tech startups raised $628bn globally in 2021 in more than 34,000 deals. Between January and March this year the number of transactions fell by 5% compared with the previous quarter. The amount of capital invested dropped by 19%, the biggest quarterly decline since 2012. The unicorn boom’s superstar investors have been walloped. On May 12th SoftBank, a Japanese tech investor with a penchant for risky bets, most of which are private, reported that its flagship funds lost an eye-watering $33bn in the past 12 months.
Although they were meant to reach the Moon no matter what, cryptocurre
