Several billion dollar startups got a big wake-up call on Friday when investor T. Rowe Price marked down its holdings in the companies. The mutual-fund manager axed Dropbox in particular, valuing the tech company at $7.91 per share.
The valuation is a 59% cut from what investors paid for a round two years ago. It’s even lower than what investors paid back in 2011 when it went for $9.05 a share.
Other startups who got marked down include Apptio, Flipkart, Lookout, Cloudera, Houzz, and Warby Parker. Uber and Airbnb weren’t above T. Rowe Price’s cuts either. The mutual-fund manager marked both companies down by 6%.
Notably, T. Rowe also took a heavy ax to its common stock Series 1 investment in Evernote, cutting it by 75%. However, it didn’t mark down the value of its later rounds in Evernote. The valuation with Evernote is particularly interesting.
The Wall Street Journal notes that a spokesman for T. Rowe Price explained of the valuations, “The first quarter was an extremely volatile period for global equity markets. In determining fair values for our private investments, we continued to follow our long-established process of considering a variety of company-specific and market-based factors.”
Of the 17 startups that T. Rowe holds in private tech companies valued over $1 billion, seven of them are now carried below their purchase price. These valuations are a sure sign that many of the mutual fund manager’s early bets in startups aren’t working out.
T. Rowe isn’t the only mutual-fund firm to drastically cut back its investments in startups in recent months. Firms like Fidelity Investments, BlackRock Inc., and Wellington Management Co. have also marked down the values of their stakes in startups. These cuts have made it difficult for firms to raise funding at higher valuations and to attract new employees with their stock awards.
While T. Rowe’s valuations can be considered a warning for startups, valuations by mutual-fund investors are opaque in their methodology and they often disagree over the value of shares they own in the same company.