The British Business Bank swung to a loss of £135 million ($165 million) in the year through March, as the UK’s state development bank was stung by the broader downturn in startup valuations.

The BBB was forced to unwind some of the unrealized gains it previously booked on the small companies in its equity portfolio, reflecting a decline in publicly-traded peers’ market valuations, according to a statement. The bank warned that this activity “may well continue over the next 12–18 months.”

“We highlighted in last year’s results that showed a very significant gain that a lot of that gain was a little bit ahead of where reality was,” Chief Executive Officer Louis Taylor said in an interview. “This year’s results reflect a return to something like reality.”

The £135 million loss for fiscal 2023 compares to a £453 million profit in the prior year.

The organization partners with banks and other lenders to extend financing to small businesses, often taking equity stakes in firms through British Patient Capital and other programs. It has a particular focus on life sciences, technology and companies based in regions outside London.

The BBB has backed more than 90,000 businesses since it was founded in 2014. It currently has stakes in about 1,200 companies and the portfolio is still valued at roughly 150% of its initial investment, Taylor said.

“The path to realization is never completely smooth,” he said.

The results exclude a portfolio of Covid-19 emergency loans, which the BBB oversees on behalf of the government. Taylor said his organization has “a strong commercial dialog” with all 28 banks that issued these loans, as they tally up the mounting losses in the taxpayer-backed program.