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China’s Stock Market Troubles Threaten Private Funding

As the valuations of Chinese tech companies continue to rise, tech investors in the country are starting to grumble about the high prices. And China’s volatile stock market seems to be making the problem worse.

Investors are worried that the market volatility could hurt future IPOs in China at the same time that investors are starting to balk at rising private valuations.

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Those kinds of rounds may be useful beyond just building up the companies’ war chests. Until the Chinese stock market stabilizes and China-based IPOs become a real option again, many of the larger firms that have previously raised big rounds could be better off remaining private. Meanwhile, the ones that have been out looking for growth rounds only to come across nervous investors face an uncertain future.

Doug Crets commented on this article.
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“Last year, people were saying the [private] valuations were too high…But instead of negotiating down valuations, the sector has just became less active,” Mr. Wang said