Dive Brief:

• Tech and web-based startups in 2016 could struggle to garner the kind of private funding they’ve enjoyed in recent years, reports the Wall Street Journal.

• That could lead to pressure to go public for financing, but that could be a tough sell as well, investors and bankers have told the Journal. Several retail-related stocks, including Etsy and Alibaba, have fallen below their IPO prices.

• Startups that went public in the U.S. raised some $9.5 billion in 2015, down from $40.8 billion in 2014, according to Dealogic, reports the Journal. The number of tech startup IPOs fell from 62 to 29.

Dive Insight:

It looks like the investment environment for tech-based startups is getting tough, as major investors, in search of more of a sure thing, get more conservative. Even the slight rise in interest rates in the U.S. is also a damper to the environment.

“We have definitely seen a shift in sentiment over the course of 2015, which has not only impacted valuations in the public markets, but has also made private raises more challenging,” David Ludwig, head of technology, media and telecom equity capital markets at Goldman Sachs Group Inc., told the Wall Street Journal. “The longer valuations stay at current levels, companies and their shareholders will realize this environment has become the new normal.”

One area of particular pressure in retail could be the on-demand delivery market, where several companies in various areas of the U.S. continue to expand but without any sure signs of profitability. 

It's not clear how many of today's delivery startups, especially those in the one- and two-hour space, are making money or close to making money, and the field is only getting more crowded. GrubHub, which went public last April, was downgraded in the fall, due to increased competition and decreasing operating cash flow, among other factors. 

Restaurant and booze deliveries don’t have the luxury that same-day delivery companies like Deliv and Grand Junction’s services have to bulk up in the morning and make deliveries later in the day. “On-demand” for those catering to the hungry and/or thirsty is not “same-day” but more immediate, and that could be difficult to pull off, at a profit.

“In order to deliver on your promise of on-demand, you have to have enough resources roaming the city to meet market demand,” Marc Kuo wrote last year in a blog post titled “Why the Uber-for-X Wave Should Stop: The Case Against Everything on Demand.”

"At the same time, you better have enough volume to keep everyone busy. Otherwise, you’re probably bleeding cash.”