A startup 'extinction event'

Here are three of the week's top pieces of financial insight, gathered from around the web:

How private equity ate the market

The number of publicly traded U.S. companies has fallen by more than half since 1996, said Nicole Goodkind at CNN. "Back then, the number exceeded 8,000 companies." Today, the count has dropped to just 3,700, according to data from the Center for Research in Security Prices. "It's not that America has half as many companies as 30 years ago — it's that companies are increasingly staying private." The IPO market fell by nearly 95% in 2022 after lackluster returns the year before. There are also "about five times as many private equity-backed firms in the U.S. as there are publicly held companies," holding more companies back from listing. In 1999, the average U.S. tech firm went public after four years. It's now about 11 years.

A startup 'extinction event'

More startups are "throwing in the towel," said Yuliya Chernova in The Wall Street Journal. The ramp-up in interest rates, making borrowing more expensive, is taking its toll on small businesses as "fresh capital from venture investors and bank loans" becomes harder to come by. "Startups in the U.S. raised $37 billion in the first quarter of this year, down 55%" from the same period a year ago. The longer the market stays depressed, "the closer many startups get to the moment of truth." Several high-profile tech startups have already folded or entered a wind-down process, including Zume, a "robotic pizza maker once valued at $2.25 billion." One partner at a major venture capital firm calls the wave of closings a "Mass Extinction Event for startups."

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More homebuyers turn to cash

The share of homebuyers paying all cash in April was the highest in a decade, said Al Yoon in Insider. "Cash buyers represented 33.4% of transactions in April," Redfin reported last week, "far above levels hovering around 25% for most of the past decade." Realtors are "battling the perception that the cash offer is always king" in order to keep borrowers from giving up. But in a shrinking housing market, where the "total number of homes on the market is 5% lower than last year," the competition is tight. "People who needed financing" were already "foiled by rising interest rates." Now any advantage for cash buyers may be amplified even more as banks tighten credit after the March bank runs.

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