Tech Stock Chill Has Arrived in Startup Market 'With Something of a Vengeance,' Says Venture Capitalist Moritz

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The market for tech startups is facing an increasing chill as hedge funds and other new investors to the sector have significantly pulled back, longtime venture capitalist Michael Moritz, a partner at Sequoia Capital, said at the Wall Street Journal’s CEO Council Summit.

The public tech rout “has come into the private market with something of a vengeance,” Mr. Moritz said.

Investors who had traditionally invested in the public markets had moved into private startups in the past half decade, he said, causing a huge surge in demand for young tech companies.

“That cadre of investors has fled⁠—they’ve just gone away,” he said. “So a lot of availability of that money has come out of the market.”

Mr. Moritz, a onetime journalist at Time Magazine, went on to become one of the best-known early investors in tech, making early investments in Yahoo, Google, YouTube and other top Silicon Valley names.

Today, he is bullish on the long-term despite the reset of valuations. He reminded the audience that Google’s stock plunged in the 2008 financial crisis, but anyone who had held the stock from its prior peak, through the nadir, would be extremely happy now.

“Exactly the same thing is going to happen today⁠—the companies with really good business models are going to just be fine,” he said. Many of the so-called pandemic stocks like Zoom Video Communications Inc. and Peloton Interactive Co. are many times larger companies today in terms of revenue and customers than they were just a couple years ago, he said, even if recent stock investors have been hurt.

The companies, he said, “were coming off a triple booster shot during the pandemic,” he said.

Sequoia recently celebrated its 50th anniversary and reported that as of late last year, it had over $85 billion in assets under management. Its early bets on Airbnb Inc. and DoorDash Inc. brought it billions of dollars of profits on just a few hundred million dollars of investment.

Mr. Moritz also said he remained bullish on Chinese investments outside of the consumer sector, where the government has clamped down on companies like ride hailing giant Didi Global Inc. So-called “deep tech,” where companies are investing in artificial intelligence and other new innovations, is “a very vibrant, massive, growing sector in China,” he said.