Cloud stocks were already down 40% from their 2021 highs when Cube CEO Christina Ross launched fundraising efforts for her financial planning software business in February. They have a lot more to drop in the coming months. When Cube launched its $30 million Series B round in mid-June, the broader market was about to have its worst first quarter in 50 years, led by a drop in high-growth tech equities, which had been the top outperformers in the Nasdaq Composite’s ascension to a record in November.
The private funding market tends to lag behind public stocks, providing venture investors time to modify their exit price expectations. However, the transition is now complete.
The IPO market’s suspension has effectively halted pre-IPO rounds, and the sharp decrease of software multiples has stymied private deal flows. Companies are doing everything they can to avoid the dreaded down round, which is funding that is worth less than the preceding round. Ross, who started Cube in 2018, anticipated that any valuation today would fall far short of the bubbly days of 2020 and 2021. However, she was also aware that many of those high-priced deals had produced an albatross for the receivers, who now face a financial burden and gloomy reality.
