Forget the eye-popping valuations: The sentiment in Silicon Valley is now "show me the liquidity."
That's what venture capitalists who have invested in start-ups are saying, as they increasingly want to enjoy actual cash returns from the start-ups they have supported. But that would mean founders need to either go public or sell their companies.
And less of that is happening, according to a report published Monday by CB Insights.
Overall, tech exits did increase 28 percent in the third-quarter year-over-year, but the sequential trend appeared much different: Exits declined 18 percent compared to the second-quarter.
And for VC-backed tech start-ups, in particular, the quarter was notably weak with just 145 exits, including only four IPOs. That was the worst quarter for exits in two years.
"Many M&A groups have said that private market valuations, especially in Silicon Valley, are disassociated from reality and so they're staying on the sidelines or looking in other areas," Anand Sanwal, the CEO of CB Insights told CNBC. "This is one driver of the reduced activity."
Another reason? Capital remains readily available.
According to the National Venture Capital Association, start-ups raised more than $47 billion in the first three quarters of this year.
If a founder can raise the same amount of money at a higher valuation in the private markets rather than the public markets then an IPO becomes much less compelling.
In fact, in the third quarter 23 companies joined the club of "unicorns" — or those private companies valued at $1 billion and higher, according to CB Insights. But there were no $1 billion exits in the quarter — the first quarter without a unicorn exit this year.
The question is whether VCs will continue to pump money into start-ups even with this lack of exits, or will fundraising now become tougher in the months ahead.
Already, as The Wall Street Journal recently noted, a number of start-ups have had to scale back their more ambitious valuation expectations, including e-commerce start-up Jet.com; local-services website Thumbtack; and used-car seller Beepi.
"I think we can expect VCs and later-stage investors to get more discerning," said Sanwal. "Some of the FOMO [fear of missing out] in the private markets will probably disappear."