The Bear Market Effect on Investors

Robinhood, Affirm, and Roblox were among the highly anticipated IPOs of 2021. Today, they are all trading at significantly lower prices than their all-time highs. Amidst the Fed's interest rate hikes, valuation corrections of pandemic superstar companies, and countless articles on investing during a "bear market," we're looking at how investors are changing their strategies.

Over the last 18 months, investors injected more and more capital into earlier-stage companies, and non-traditional investors fueled this competition through an influx of capital that reached unsustainable heights. The underwhelming performance of these stocks is the result of that insatiable supply.

Now, with public companies tumbling, investors are taking an 'everything but pre-IPO' approach to investing. No one wants to get caught holding the bag on an oversized valuation. Venture capitalists and "crossover investors"–those who invest in private companies and purchase public shares–are focusing on Series A & B rounds or buying up slices of public companies at discounted prices. In a recent webinar with investors, Tiger Global Management formalized its focus on early-stage companies, as disclosed to The Information. D1 Capital & Octahedron Capital have slowed down their late-stage deals, opting instead for discounted tech stocks.

It remains to be seen how this shift in strategy will affect companies dependent on large late-stage checks. We know that some companies are choosing to delay IPO plans. But looking at recent fundings, the data confirms the preference for earlier stage private company deals. Recent deals show a focus on seed and Series A rounds, mostly under $20MM. Take a look here.