Startup Investors Grow Cautious as Tech Stocks Turn Down

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The downturn in tech stocks — including shares of Google, IBM and other brand names — is making venture capitalists and IPO investors cautious. That’s not good news for startups.

Share prices for some of the biggest names fell by double-digit percentages last week: Facebook fell 17.1 percent, Netflix 27.2 percent and Twitter 39.4 percent.

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“We’re obviously in the throes of what feels like a correction for the small-cap and growth-equity companies,” David Golden, managing partner at San Francisco-based Revolution Ventures, told The Wall Street Journal. Jim Breyer, a partner at venture capital firm Accel Partners, said more time in board meetings is being spent on financial strategies.

Some hedge funds have been burned with overvaluations, and some observers have raised concerns that a crash is coming. In an attempt to prepare for the worst, some startups are hoarding cash.

At the same time, deals are getting done. VCs poured $9.5 billion into U.S. startups during first quarter, the highest total since 2001, when the dot-com bubble burst, according to the MoneyTree report by the National Venture Capital Association and PricewaterhouseCoopers.

Software developers got the biggest share — $4 billion in total. File-sharing service Dropbox led the way with a $325 million deal. That was followed by vacation rentals site Airbnb and mobile messaging service TangoMe, which each landed $200 million.

Biotech firms – a distant second — attracted less than $1.1 billion, while media and entertainment companies attracted $743 million.

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