Until recently, there has been a big fear that global economic uncertainty would spread to the United States. Now it seems like a distinctly U.S. economic phenomenon is afflicting other parts of the globe, particularly Europe.
Specifically, the market pressures that have resulted in the write-downs of private company valuations in Silicon Valley's tech sector--particularly among so-called unicorns such as messaging app Snapchat and benefits provider Zenefits that are worth $1 billion or more--appear also to have become an Old World contagion.
In addition to some high-profile bankruptcies, numerous European tech companies are now finding their high price tags are no longer sustainable, according to The New York Times.
Among the firms reportedly experiencing trouble are Swedish smartphone application company Truecaller, which has received a total of $80 million in funding from venture firms including Kleiner Perkins Caufield & Byers and Sequoia Capital. Truecaller reportedly laid off 20 percent of its staff in recent weeks.
Similarly, Swiftkey, a London-based predictive text startup that has received $22 million from investors including Accel Capital and Cambridge Capital Group, was acquired in early February by Microsoft for $250 million, a figure reportedly considered to be lower than its previous value estimate.
And executives at other startups, such as the London-based food delivery startup Deliveroo, have said they will proceed with extreme caution, focusing on amplifying profits rather than solely on growth. Deliveroo has raised $200 million in venture funding from Accel and Greenoaks Capital.
European firms took in a fraction of what private companies in the U.S. did in 2015, notching about $14 billion in 1,343 deals, according to the venture capital researcher CB Insights. That compares with $72.4 billion in 4,672 deals in the U.S. Even if the scale is smaller abroad though, a trend of declining valuations could have a huge effect on startups. And it's a trend that's likely to spread to other parts of the globe.
"When Silicon Valley sneezes, the rest of the world catches a cold," Fred Destin, a partner at Accel Partners in London, told The New York Times.