30 July 2022, AU: With the technology stocks taking a dive amidst rising interest rates, growth-style investing has become unattractive for investors meaning there is going to be less capital in circulation for startups.
On the other hand, the rising cost of capital and debt is going to put pressure on the valuation of tech companies, especially on those who have taken huge money in ridiculous valuations, i.e. Canva, as the tech investors are finally noticing the difference between price and value.
In the interview with Financial Review, Alex Pollak, Chief Investment Officer at Loftus Peak, said that “…The public market valuations have dropped which will have also cascaded into private company valuations […]” and private company valuations are expected to be readjusted.
As the public market multiples, which usually are taken as benchmarks in private company valuations, fall, so do the valuations of private companies.
This all means that investors are going to start looking for more capital efficient businesses and those that are deemed inefficient will be cut out from the funding market.
Despite all this, capital raising will still be more than possible in the Agri/foodtech sector.
Companies that are able to articulate and validate:
- a scalable business model,
- route to market,
- the startup’s niche
- and its profitability
will get funded while those looking to take advantage of unreasonably priced valuations will most likely be taking a back seat.
This means that training, mentoring and, most importantly, business matching will be crucial for agri/foodtech founders so that they are focused on building a capital efficient business which can attract investors in the new landscape.
Unpack the nitty gritty of what that means for where your startup currently stands, together with the SproutX community of mentors, industry experts, and the wider network and navigate resilient ways of adaptation through our programs.