Public markets have pulled back significantly
SaaS multiples dropping from ~20x revenues to closer to ~10x
Similar to pre-COVID levels (~2020)
Private markets also pulling back significantly
Deal data is a trailing indicator - data not released for at least a quarter
Still was hitting fundraise highs and deal count highs in Q4 2021
Very large drop in funding in Q1
Trickle down effect from IPO to growth to venture deals
Higher concentration of smaller size / earlier deals (seed/angel) in Q1 2022
Check sizes smaller but deal counts still high in this space
Exit opportunities with early stage companies are still very far away
Crypto largely separate
Explosion of web3 based funds means lots of capital ready to deploy in different vehicles from equity to token
Venture funds have a lot of money / capital is still a commodity and in excess. Where is it going?
Worst case
Fund closes, LPs renege
Base case
Slower fund deployment in the next year or so, accelerating again when the markets pick back up
Increasing positions in existing portcos
Secondary opportunities
Other
Increased consolidation
Smaller companies with 0 traction or product will be wiped out. Only those who have a superior product will be able to raise well
Push and pull of power - not a founder's world anymore
What will valuations look like? Round sizes?
Normal is a relative term. The new normal may not be the same as 2020 / pre-COVID
VCs are figuring it out too. Definitely not the 100x revenue or $100mm valuation for a pre-revenue company. Not sure though. Will come down though
Round sizes very likely to come down
What founders should keep in mind
Burn / cash management. Most 2020-2022 founders have not seen a slower market. Managing in bear and bull markets are critical skills
Changes to the hiring landscape as less people want to join tech
This may also be a short correction. Not sure. Either way just some trends, observations, and things to keep in mind. The market moves in cycles. We must all be aware so we can navigate all of them.
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