The S&P 500 -- down 20.6 percent since the beginning of the year through June 30 -- suffered its worst first half since 1970. That has wiped out $9 trillion in stock market wealth and slashed the prices that VC are willing to pay to own a stake in a private company -- for example, Klarna's valuation could be down 87 percent, noted Bloomberg.

Such drops in stock market valuations spooks VCs because they kill investors' appetites for initial public offerings (IPOs). No IPOs means that VCs lose a key avenue for earning a profit on their risky startup bets. READ MORE