Triple Point today became the latest private equity firm to lament a downturn in tech valuations after it reported a slump in the value of shareholder assets.
The London-based company’s listed tech investment fund, Triple Point VCT 2011, saw its net asset value per share slump just over 10% to 102p in the year to the end of February, while total return per share fell 7% to 111p.
Chair Jane Owen signalled that the company’s fintech investments were among the worst performing over the year.
She said: “After perhaps excessive enthusiasm by investors and entrepreneurs between 2019 and 2021, funding became markedly more difficult to come by for companies that were demonstrating anything less than top tier revenue growth rates.
“Tightening monetary policy led to higher bond yields which in turn led to lower valuation multiples for stock market listed tech and growth companies as some of the heady optimism of the 2021 tech boom was deflated.”
Forward Partners, another London-based venture capital business, has also reported a decline in shareholder value in 2022, after its portfolio value sunk to £80 million from £117 million in the previous year. Its shares are down 42% over the past twelve months.
Susannah Streeter, Head of money and markets at Hargreaves Lansdown, said: ‘’Start-up tech companies are labelled as growth stocks and much of their value comes from the anticipation of future earnings. But as interest rates have ramped back up to tame wild inflation, that affects how those future revenue streams are calculated and valuations have been sideswiped.
“The fight for top tech talent has seen wage demands soar adding to costs and as the era of cheap money has hurtled to an end it’s been harder for many to access funding. This appears to be behind the sharp fall in value of Triple Point’s portfolio.
“There is still significant liquidity washing around the financial system, and although clearly there is more caution given the macro-economic climate, there are bright spots of investment. Companies in health-tech, logistics and innovations centred on improving how human resources are managed still attracting venture capital interest and the funding to match.
It follows a turbulent period for Triple Point after it earlier wrestled with the collapse of Silicon Valley Bank, to which a suite of the tech businesses in its portfolio had been exposed.
Seb Wallace, Investment Director Triple Point, said investors were now paying much closer attention to how tech startups had arranged their banking facilities.
“This [collapse] has rammed home a prudent cash management approach and firms have a clear need now to have multiple bank accounts to spread risk,” he said.
