The Real Deal New York

Some real estate startups have seen sky-high valuations. Now, investors want the market to dip

Venture capitalists hoping downturn will calm the startup scene
January 07, 2019 08:30AM

(Credit: iStock)

Unicorn real estate startups like WeWork, Compass and Airbnb have seen whopping valuations this year. But now, some venture capitalists are hoping the startup market will turn.

With startups expanding rapidly – some going public at sky-high valuations – it’s become harder for investors to get deals done, according to the New York Times. That’s because VC firms often prefer to invest in new companies for less money with the goal of eventually making a bigger return.

A decline could happen this year. Stocks took a fall in late 2018, and the market has seen wild wings so far this year, which has some investors already getting ready for a downturn. They are setting money aside and keeping a close eye on companies they could not afford to invest in last year.

The median company valuation in 2018 for one set of mature start-ups hit $420 million last year, a huge increase from $183 million in 2017, according to Carta. A 2017 study from the National Bureau of Economic Research looking at 135 “unicorn” start-ups — firms valued at more than $1 billion — found that they were overvalued by 50 percent on average.

“What’s happening right now isn’t sustainable, and it won’t go on forever,” Costanoa Ventures managing partner Greg Sands told the Times. “It can’t.” [NYT] – Eddie Small