Icy, cold, chilly…words that are appearing both in weather reports and outlooks on the tech market this week.
Driving the news: Regardless of what part of the tech ecosystem you look at, the last week has come with headlines that suggest financial struggles are going to stick around:
- The OSMO Foundation will likely sell Notman House — Montreal’s top tech hub and incubator — after falling $323,000 behind on mortgage payments.
- After raising US$570 million, VC firm OpenView suspended its seventh fund and laid off most of its staff.
-
BlackBerry walked back plans to file an IPO for a spun-off internet of things company. A stagnant IPO market and lack of stock movement suggests it may have over-estimated investor interest.
-
WeWork, Olive AI, Convoy, and Veev are among the unicorns that have filed for bankruptcy or shut down since November. In Canada, similar fates have befallen RenoRun, Tehama, Pillar Financial and Billi Labs this year.
- Even some start-ups working in AI are having a tough go as they run into competition from the tech giants and OpenAI.
Why it matters: The funding environment in technology has been getting cooler and cooler since Silicon Valley Bank’s collapse in March.
- VC volume in Canada hit a three-year low last quarter, while the TSX had only one IPO this year as other tech companies have continued dropping off the exchange.
Yes, but: Things are measurably tough out there, but that doesn’t necessarily mean a techpocalpyse scenario. The people holding on to the money are just getting more pragmatic.
- Younger start-ups are still attracting investors. It’s later-stage companies and unicorns that are struggling to justify existing valuations and further capital infusion. That’s creating a skewed view of the market.
- Many AI companies are also getting investors, who are just being more choosy about what they back. They want to avoid companies who can’t deliver on ambitious promises, or are at risk of disruption by better models from faster rivals.
Bottom line: That’s the economy, baby! Everyone is feeling the pinch as we head towards recession. And like how tech companies began “right-sizing” their headcounts a year ago, this might just be a case of funding and investment falling back to realistic levels.