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When WeWork, the once high-flying office space company, was forced to call off its Wall Street debut in late 2019, it was seen as a mea culpa for the startup world.

For years, young companies making big promises had binged on money from venture capitalists and other private investors while reporting huge losses. Now, the thinking went, that would have to change.

It didn’t.

Investors, flush with cash during the recovery from the coronavirus pandemic, kept looking for new places to park it. Startups pledging fast growth looked like a great option. US venture capital-backed companies raised almost $330 billion in 2021 — roughly double the previous record from 2020.

Almost three years after the WeWork scandal, however, a real reckoning could be in the offing, as the financial conditions that helped facilitate the startup boom begin to vanish.

Breaking it down: For the first time in years, interest rates are rising, dimming enthusiasm for speculative investments and pushing investors to dump their tech holdings en masse.

Meanwhile, market volatility is making it more difficult for companies to go public. That will make it harder for venture capitalists and other private investors to exit their positions, and could make it trickier for late-stage startups to secure funding.

That’s already showing up in the data, according to PitchBook, a research firm. While valuations for mature startups remain high, they fell in the first quarter compared with 2021.

On the radar: Companies still want to raise money by going public. Grocery delivery startup Instacart, one of most valuable private firms in the world, confidentially filed for an initial public offering this week.

But it won’t raise as much as it might have 12 months ago. Instacart revised its valuation from its peak of $39 billion down to about $24 billion in March, citing recent market turbulence.

Investments in early-stage startups are faring better for now, since they have a lot of time before they need to weigh IPOs, PitchBook said. But that could change in a “couple more quarters” if market conditions remain intact, sending a chill through the entire startup ecosystem.

Masa said it: Nowhere was the mood shift clearer than on SoftBank’s recent earnings call. CEO Masayoshi Son poured billions of dollars into startups in recent years, making him the most prominent tech investor in the world.

But on Thursday, SoftBank said its tech funds had lost more than $27 billion in its last fiscal year, by far their worst performance on record. In a presentation, Son acknowledged the losses and pledged to start taking a more conservative approach.

Going forward, the Japanese conglomerate will be more selective about which deals it takes on, roll out stricter criteria for new investments and focus on improving returns from its portfolio companies, he said.

More than $7 trillion has been wiped out from stocks

It’s no secret that the stock market’s meltdown has been brutal. But how much money have investors really lost this year?

My CNN Business colleague Paul R. La Monica did the math. He calculates that more than $7 trillion in market value has been erased from the blue-chip stocks in the S&P 500.

The index is down nearly 18% since the end of December. That puts it barely above bear market levels, which refers to a 20% decline from a recent closing high.

The Dow is down more than 13% this year. The tech-heavy Nasdaq Composite, meanwhile, has been in a bear market for months. It’s plunged 27% so far in 2022.

Bespoke Investment Group said that should ring alarm bells.

According to data from the research firm, the Nasdaq has plummeted more than 20% in the past 30 trading days. A drop of that magnitude has only happened 11 times before. Nine of those declines were “associated with recessions,” according to Bespoke.

Nearly $3 trillion of the S&P 500’s market cap drop is from the tech sector. Shares of tech leaders Apple, Microsoft, Amazon, Google owner Alphabet, Facebook parent Meta and Tesla are all deeply in the red.

Netflix, down more than 70%, is the worst performer in the S&P 500 this year.

Panic in the crypto market eases (for now)

The crypto sector was dealt a huge shock this week when so-called “stablecoins” — which underpin the digital economy as stores of value — came unglued, an unprecedented moment that fueled a wave of panic-selling.

The mood has settled slightly in the past 24 hours. Tether, one of the most popular stablecoins, has mostly recovered from a sudden drop on Thursday and is now trading just below $1. Because Tether is designed to be redeemed for $1 at any point in time, that’s helped restore confidence in the system.

Bitcoin is trading above $30,000 again, up more than 9% in the past 24 hours. Coinbase, the most prominent publicly traded crypto company, was up 16% in premarket trading Friday after skidding 44% earlier in the week.

But concerns persist around algorithmic stablecoins like TerraUSD, which use financial engineering to maintain their dollar peg instead of relying on actual reserves. TerraUSD was last trading at 18 cents — a whopping 82 cents below where it should be, based on its promise to investors.

That’s keeping crypto traders on edge as they grapple with eye-watering losses, and boosting calls for regulators to step in with better oversight.

“The crypto carnage, volatility and wealth destruction over the last few days and weeks are red flags as to the threats posed to customer protection and systemic stability by cryptocurrency investments,” Better Markets CEO Dennis Kelleher said in a statement Thursday.

Up next

Honest Company reports results before US markets open.

Also today: The University of Michigan consumer sentiment survey for May posts at 10 a.m. ET.

Coming next week: Earnings from top retailers, including Home Depot, Walmart, Lowe’s, Target and Kohl’s.