With the prospect of interest rate hikes looming, some market observers are calling the peak for startup valuations.

Venture capital firms raised a record $128 billion for new funds in 2021, according to PitchBook. 

As hedge funds and other investors swamp private startups with huge checks, startup investors rarely change their minds about the price of a company after signing deals with founders, but that’s expected to become more of a thing as the private market adjusts to tech stock selloffs.

One of the top funders of private tech startups in the past two years, Tiger Global Management and others have been cutting their offers for shares of private software startups, sometimes after founders signed the investment paperwork, people with knowledge of three such deals told The Information.

Tiger Global, which has backed companies including Coinbase and Roblox, invested in more than 300 startup deals in 2021, “closing deals in as little as three days and offering terms so generous founders essentially just named their price,” The Information reported. 

But many of the public stocks have since sold off and Tiger Global’s long-only fund, separate from its venture fund, went down 4.2 percent in 2021, according to Bloomberg. In late 2021, the company renegotiated billion- or multi-billion-dollar deals with blockchain startup Blockdaemon and Estonia-based identity verification startup Veriff.

Share prices for some of the major tech public offerings since late 2020, including Robinhood, Coinbase and DoorDash, have fallen as much as 65 percent since their debuts. The recent stock sell-off has led some smaller companies such as Justworks and Trajector to postpone or withdraw their IPO plans, The Information reported.

The three largest ETFs in Cathie Wood’s Flagship ARK innovation ETF fell around 33 percent from Jan. 3 to Jan. 27, 2022.

Venture capitalists, especially growth equity investors, have been rewarded for years for “their price insensitivity,” Dan Primack wrote for Axios, operating on the assumption they should “Just win the deal, because someone else will pay more down the road.” However, IPOs — most, from venture-capital-backed companies — have significantly underperformed the S&P 500 for the past year, as have SPAC companies.

“We know we’re on the other side of the valuation hill because when we turn around, we’re looking up,” Primack wrote.

Not everyone agrees that valuations have peaked.

Stock for SVB Financial Group, the parent company of Silicon Valley Bank, took a hit in recent weeks along with other tech stocks, falling more than 20 percent from all-time highs after a great fourth quarter.

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?

Higher interest rates — one of the main ways banks earn income — lower the future value of cash flows, so high-growth company valuations are among some of the most sensitive to expected changes in interest rates, Nicholas Rossolillo wrote for The Motley Fool. This explains the steep declines many tech stocks saw in recent months, dragging SVB down with them. 

However, despite the prospect of higher interest rates in 2022, the investment bank said in its last earnings call that it is confident about 2022. Recent market volatility is a great opportunity to buy the dip and 2022 looks to be a fantastic year, according to SVB. SVB even upgraded its 2022 guidance, raising its expectation of net interest income growth from a low-30-percent rate to a high-30-percent rate.

Stocks opened mostly lower on the last day of January, with major indexes on track to close the month with big losses. The Dow was down almost 4.9 percent for the month, the S&P 500 was down 7.2 percent and the Nasdaq Composite, made up of rate-sensitive growth stocks, was on track for almost a 12-percent slide in January.

“You’re going to see an increasingly discerning lens [by venture capitalists] over who gets sky-high valuations and who doesn’t,” said Mark Goldberg, a partner at Index Ventures, according to The Information. “The [companies] that aren’t obviously exceptional will face more of a reality check…”