Valuations of closely held technology companies could decline by about 5 percent per month in the next six to nine months, according to Anton Levy, managing director and head of global Internet and technology at General Atlantic LLC.
“You’re going to see a lot of failures. You’re going to see a lot of writedowns,” Levy said on Friday last week at the Columbia Business School private equity and venture capital conference.
Levy, who serves as a board observer to Uber Technologies Inc and Airbnb Inc, said the industry started to see a “needed” valuation correction last year.
Still, some of the best start-ups will continue to do well, he said.
Fidelity Investments, one of Snapchat Inc’s largest investors, wrote down the value of the photo-sharing app maker by 2 percent in December last year, the second time in three months it cut the company’s valuation.
The Fidelity Blue Chip Growth Fund, one of the funds that holds Snapchat, reported the value of those shares at US$17 million as of Dec. 31 last year, according to a public filing. The same holding was valued at US$17.4 million on Nov. 30, last year.
Mutual funds have also marked down the value of their stakes in private technology companies including Dropbox Inc and Zenefits.
The most at-risk companies are those too reliant on capital, Levy said.
Significant declines in valuation could encourage part-time investors in tech start-ups, such as private equity firms and public market investors, to retreat from the industry, he said.
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