The great VC pullback of 2022 | Hacker News Reader

The great VC pullback of 2022

mattturck.com

223 pointsimartin2k108 comments

Having been at a series C+ company that ran out of money. There are a few things to keep in mind if you are working at a non-profitable startup.

1) Investors need to invest in something, not continuing operations. Companies who are about to run out of money will often claim to pivot in a different direction, launch new products, or go on hiring binges. A good sign that something is amiss is when all of this isn't backed by any customer interest, the internal story is meh, and leadership is steadfast that this is the direction.

2) At some point all of the senior leadership needs to focus on getting VC money, or selling the business. You may have high pressure dates one month, and then an erie calm where no one seems to care about anything. Because frankly, leadership has stopped caring about the business and it no longer matters to the company.

3) A debt round shows up, these are usually life support rounds for companies missing their metrics. The company doesn't want to lose valuation, but they don't have any deals lined up yet. The debt is to keep the show going while they figure things out. Caveat: Debt rounds because the company aims to be profitable, aren't that bad.

4) Implosion, if the company has a high burn and no offers - then something has to give. The thing to give is the $NewIdea, not the core product - however if the core product is shrinking/mature the core product team may see layoffs as well.

At this point, if I consider a startup - I look to join just after a funding round has closed. This means that the money to build your product is there, the work will be new, and the company doesn't have to go through hijinks. The worst time to join a company is when they say they are working on a funding round.

I agree you'll hear a lot of "we're still pulling the round together" if you interview at a series C company right now.

But if they really are near closing it, the best possible time to join is before the new 409a (not after).

Perhaps, but most Series C equity is already paper money for employees. Companies are going to Series D/E/F rounds with regularity - and you may be looking at 5+ years to liquidity. A company that is getting tepid investor interest likely won't see a major upswing in valuation for their next round.

Consider that as you join a company working on its next round, you may have a 50% chance of major company restructuring which can range from the project you were promised vanishing, to you being laid off. A 15% chance that you get a free doubling of your equity comp on the next 409A valuation (which may be insignificant, have a 90 day exercise window, or other hijinks). While having a 35% chance that nothing major happens.

Unlike an investment portfolio, I have a finite productive lifespan where I can do good work and receive a good payoff for it. Getting stuck at a company going nowhere, or worse getting laid off from one is not a good way to spend that time.

Fair points, I'm just saying if you can trust the founders (e.g. you knew them before they started the current company) then it's in your best interest to join before the next round.

If you're joining as employee 400 and don't know the founders, then yes, joining before the round is risky.

This is good advice. However bear in mind that the moment a term sheet arrives, the old 409A is invalid. So if the company is fundraising, make sure you get your options allocated immediately (even if that requires the board to have to sign off outside of their regular meeting cycle). Otherwise, once the term sheet arrives, you will get your options at the new strike price and there's not much the company or you can do about it.

> The worst time to join a company is when they say they are working on a funding round.

If the company is doing well, this can be the best time, because your stock will immediately appreciate significantly.

You're describing the risk/reward calculation.

If you want to join immediately after the round is closed, your risk is lower, but so is your reward.

Sure, but the relative risk to you as an employee is much higher if the round is not favorable. As an employee, you likely joined because of.

1. Career opportunity (build a new team/product/service etc.)

2. To make more money

The risk that these don't come together for you are much higher as an employee, compared to some possibility of getting shares at a small discount. If the company thinks that their raise is a sure thing, then they are likely to offer you fewer shares and make vague promises about future valuations anyway.

Even if the company isn't sure about their raise, they are likely to pitch your offer on the post-money valuation of their hypothetical, un-financed funding round.

I'm an old fart who was around for the dot com days. Huge red flag the minute leadership shifts from growth to profitability. Usually a good time to update your CV.

Wish I had read this very comment years earlier in my life.

Let that be my way of saying: this comment is dead-on.

>Huge red flag the minute leadership shifts from growth to profitability.

Hasn't over 2/3rds of FAANG done this since the beginning of the year?

We're still considering FAANG startups?

Are you discussing internal projects because Facebook, Amazon, Apple, and Google have been profitable for a while. Netflix lost growth and was crushed.

Nit: Netflix had negative growth and an outlook for a lot more negative growth.

Netflix lost growth when they cut off Russia. Somehow (I have no idea how) they seem to have grown without it.

> Companies who are about to run out of money will often claim to pivot in a different direction, launch new products, or go on hiring binges.

Why would a company that is about to run out of money go on a hiring binge?

I think you have cause and effect backwards.

Because a 1% chance of turning the company around is better than a guaranteed slow bleed to insolvency.

To add to this, growing headcount and fancy marketing can get the dumb money to re-up.

If you double customer acquisition costs through sales HC, you’ll probably get some new growth.

If you build a whole new team for a trendy thing, it might match some investor thesis.

1) you need people and money for success. you need to spend on marketing or customers won’t know about your product. in my experience investors expect products to find adaption in some free/magic/viral way if they are any good. of course that is a simplification.

VCs love to tell everyone the market is moving in their favor (lower valuations, fewer deals, etc). It’s like car salespeople telling you this car won’t last long.

Some of it may indeed be true, but it’s in their favor to give founders anxiety. It’s a negotiating tactic, not a public service announcement.

I don't really agree with this, with what I've seen. Or maybe we're just interpreting tea leaves differently. I think in a lot of cases, "market is moving in their favor" is not lower valuations, but higher valuations in the verticals that the VC is themselves investing in. Some of that might be signalling for later-stage VCs to invest at later rounds. But I think, other than the onset of Covid, and the last 6 months, I haven't seen an overly negative messaging. It might be true that the immediates (lower valuations) benefit them, but the long-term (no later-stage funding) is not in their favor.

That's a great nuance. I was referring to it being in their favor for dealmaking.

Here's another one from 1 month ago: https://www.linkedin.com/posts/darian314_founders-activity-6...

I read this in a more friendlier way...

> But I think, other than the onset of Covid, and the last 6 months, I haven't seen an overly negative messaging.

But that is exactly when they could and did do the messaging - if you were out there saying VC is drying up from July 2020 to December 2021 you would have looked like a moron; but the negative messaging was very apparent the months prior and after that window.

It is absolutely in investors interests to paint a narrative of economic downturn - they are bidding to buy something, and they want to buy it at the best price they do so.

I'm not saying that is unscrupulous - that's how dealmaking works, but it is very real.

Take it for what its worth from a random internet stranger, but Matt is a good dude. I'm a founder and I wouldn't change any of the advice he's laid out here.

I mean the comparison to car salespeople is a bit harsh but yeah anyone who is dealmaking plays some kind of games to varying degrees.

There is a broader narrative that they are trying to point to that is LP money isn't showing up in the same way now that there are other opportunities to generate returns in the macro market. Combine that with geopolitical risks and public tech companies valuations getting crushed - the market isn't as plush as it was say 3-6 months ago. Also - look at SPACs - complete collapse of that market.

He's saying what any reasonable market watcher would say: the market is in a very turbulent time - very rich deal flow and easy money from 2021 is not what you will find in 2022 in the current environment.

Whether you believe him or not - that's your prerogative. I have found many founders to be mostly unaware of macroeconomic and/or the fundraising market conditions until they need to get money (not a slight but rather they need to focus their time elsewhere). This is a PSA to those people who need a bit of a heads up - SPAC dead, fundraising is slowing down dramatically, IPO market crickets). Hopefully it changes soon as we get some indicators we are back in a bull market and valuations get a reset to a more reasonable range.

You're right -- it's a bit harsh. I've been on both sides of the investment committee meetings. As a result of that, I've seen (and delivered) this messaging before.

Matt's an excellent investor and someone I respect and trust. So are the other investors putting up orange flags for their portfolio. It's smart to be prepared early.

But it always seems like investors get giddy with excitement about saying the "sky is falling" and things are about to become far less founder-friendly. This tends to cause a lot of unnecessary panic within the entrepreneur community, especially new founders. And I've seen people make decisions that contribute to manifesting the very situation they're scared of.

I've checked in with a handful of friends with their own funds recently. Most seem to take a cooler tone: deals are still flowing. Things may be slightly adjusted, they admit. Low-quality businesses aren't getting as much attention. But the world is still spinning. And it doesn't sound as bad as one might assume reading this article.

And some interesting dynamics are playing out that are founder-friendly: cash-rich funds from the later stages are coming down earlier. They're competing for the same deals as smaller funds, but they're much less price sensitive. Matt Turck called this out directly. I've directly seen recent deals where this happened. It's kind of breaking the model for some early-stage funds, who need to get their main ownership chunk early and don't have as much capital to follow-on later. They just can't compete with these check sizes and valuations.

So it's also making it a lot harder for investors right now, too.

That's a fair assessment and there are a lot of different impacts to be aware of. Like you said founders who are hypersensitive and might over react probably need a slightly less responsive response to VC. Tough power dynamic though so I get why founders would react.

The cash-rich funds are coming in as there aren't good looking exits at this point due to the inflated valuations / overall market conditions. Might be helpful for founders for sure. Curious how this will impact the broader community and how that will play out on their actual fund returns. Definitely puts the squeeze on smaller seed / angel investors

Thanks both for a thoughtful discussion.

Just one important nuance -- VCs like me who come in early and stay with portfolio companies for 5-10 years are both on the "buy" and "sell" side of the market.

So yes, a slower VC funding environment does impact valuations favorably for VCs, for net new investments (the "buy" side), so I'm talking my book to some extent.

BUT net new investments is only a part of the job (<50% for sure) for a VC like me. Most of my time is spent working with my existing portfolio (sitting on boards, etc). And a harsher environment is bad news for my existing portfolio (and/or anyone's portfolio), and me (and/or investors like me) as a result. Like a lot of VCs, I've looked like a "genius" for the last couple of years as many of my investments became unicorns, with huge paper markups. Now it's likely that the pace of markups is going to slow down significantly. Perhaps we're entering a world of flat valuations - or even downrounds? No markups is not a good look for VCs - makes it harder to raise the next funds, etc.

So yes, in the long term, it's good for VCs if we're able to invest in (the right) companies in the 2022-2023 cohort at lower valuations. But that will take 8-10 years to manifest into concrete results, by the time those companies become very big. In the meantime, VCs won't have a lot of fun navigating a flat round/downround environment (if it does indeed materialize) with their existing portfolio.

Great points! Thanks for hopping in and adding extra color.

Navigating a whole portfolio through a flat/down environment sounds incredibly stressful.

If the driver of these changing environments is predominantly investor perception, public early warnings seem like they would accelerate or exacerbate them.

For example, if you publicly announce you’re expecting flat or down rounds (and similarly lowering your offers on new deals), it’s almost like applying downwards price fixing pressure. The next investor in your businesses feels they can also offer less without losing the deal. In this way, the warning manifests the crisis.

To protect the portfolio valuations, it would then seem strategic to prepare and react in private. But public warnings seem more strategic towards lowering valuations of new deals.

That’s why I’m naturally skeptical about the motivation for signaling.

Interesting. Maybe my customers are in a different market than where this was based on but I haven't seen a slowdown, either in deal volume or in the size of the individual deals. Bumper Q1 in fact and Q2 looks quite strong so far. Obviously the war in Ukraine has a lot of people worried and I have seen some immediate impact of this in some of the start-ups I looked at (because they either had a development or a support department in Ukraine) but for the most part it looks as long as the war does not escalate further or draws in other European territories that the impact on the start-up/VC scene will be limited.

What I do still see is a reluctance to invest in the hospitality/travel industry which used to make up a fair percentage of the investments. Most likely this is still an effect of the ongoing pandemic. This money seems to have shifted mostly towards fintech where the number of deals is up and so are the valuations.

What's with all the self quotes by the way? It doesn't really add much credibility if you are quoting yourself to make the point you are making, that doesn't add evidence, it just creates a circle.

The self-quotes really threw me off once I realized they were self-quotes. Most of them seem like self-comments, which would feel better if added as some sort of sidebar instead of interrupting the content.

Agree. I see it a lot recently where people embed their own tweets into articles they write. And often they don't even directly refer to the tweet in the main text - it is more of a weird mini summary of a few paragraphs of text just placed in there. Why? Is it in hopes readers will click through to twitter and follow the author?

Funding startups to do what?

The next big thing?

- 2016 was the year of self-driving cars.

- 2017 was the year of 3D TV

- 2019 was the year of VR

- 2021 was the year of NFTs.

Augmented reality is probably the next item for that list.

Here's the current YC batch.[1] Too much crypto crap. Lots of "Salesforce for X". Lots of "Payment thing for Outer Nowhere". An asteroid mining company. I can see throwing $500K at a lot of things to see what sticks, but little on that list matters.

[1] https://www.ycombinator.com/companies?batch=W22

You can also say the same about any batch:

https://www.ycombinator.com/companies?batch=W12

Lots of payment apps

Lots of cloud for X

Mobile apps for the Y industry

Uber for Z

Those things were newer then. By now, most of the easy and highly profitable things you can start doing for $500K have been tried.

The Web opened up a big range of possibilities. Most of them have been done. Smartphones opened up more. Most of them have been done. These little startups mostly rode on the coattails of the previous New Big Thing.

But there is no current New Big Thing ecosystem. The last four or so attempts have flopped.

Now, there are big expensive things to do. Electric car manufacturing. Rare earth mining. Wind farms. Vaccine development. Wafer fabs. But those all have a big price of entry and established entrants.

As a bystander not viewing this through SV lens, I do somewhat hope that the VC bubble bursts (although I 100% feel bad for low level employees that will suffer).

Looking at the market during 20-21 it seemed like it was acting in ways that, at least to me, feel like market manipulation/fraud/pyramid scheme (see SPACs). Companies that barely even had a product were "valued" at billions - it just doesn't make sense.

Also, the author seems to lack any type of real self reflection about the VC industry or the current state of affairs.

When / if the bubble bursts, it will be as bad or worse than the dotcom and subprime bubbles. Tech and vc is not an insulated think like maybe it once was, it's the current equivalent of the 80s junk bonds, it's a ponzi scheme that could unravel hard. That will be really bad for a lot of people.

I added the "if" because I'm not convinced it will play out that way because we're in some weird post-capitalist mode now where money is infinite. I think we're more likely to just slip further into sort of neo-feudilism where there is always VC money to reward the right kinds of people and behaviors and the actual business matters even less. I don't know if that's better than a big collapse, I just think that's what will happen

I'm not sure I see it.

Yes, it will hurt a few thousands currently working in overvalued growth startups, but profitable companies will continue to chug along just fine as they have hoards of cash and very low debt.

Basically a return to a state where a "Unicorn startup" is actually somewhat rare.

My view is based on the amount of notional money that exists due to the high valuations. Once that disappears, it's going to trigger a much bigger collapse, same as the mortgages did. It's not about the employees that are directly involved (though they will be hurt too), it's the relationship with the whole financial system.

I disagree I can't see this taking down the whole financial system. Is VC way more intertwined in the whole financial community? Yes - however a lot of LP money can take a cut to their returns and still be fine. Endowments/sovereign funds/oligarchs not getting > 5-15% a year isn't a country wide economic crisis. Also for VC's/start ups to unwind can be much more controlled compared to say mortgage backed securities. Timelines vary and are opaque to the investment community. It would be an unwind compared to a collapse if it even went there

Possible scenario: tech crash->rent price crash in overheated markets->all the national and international firms that bought up all the houses to rent them out crash. It just depends on how much those firms depend on markets that depend on tech/finance money to cover their loan, tax, insurance, etc payments. All it takes is a few to try and dump their stock of houses and apartments to pay bills.

Mortgages were a large part of the credit bubble prior to 2008, but very far from the only part. It also extended to consumer credit, leveraged loans, bank and insurer funding, more or less every credit market. And mortgages are and were a much larger part of the economy too than VC is now. This isn't to say VC hasn't experienced a bubble over the past few years or that there won't be a broader downturn, just that I'm pretty sure VC won't be something which causes contagion like that.

Startups usually don’t leverage their valuations (unlike real estate etc) and don’t do significant debt raising, so other than a few banks margin calling high flying founders who took personal loans against equity, the notional hit shouldn’t have much ripple effects.

Full collapse ahead, let's go go go!

Just to be clear, it's not just VC. This high valuation bubble applies to all companies, including public ones.

A lot of the high valuation / high multiple stocks from the latest bubble have already cratered.

Snowflake has gone from $405 to $171.

Zoom has gone from $406 to $99.

Shopify has gone from $1762 to $426.

Unity has gone from $210 to $66.

Square has gone from $289 to $99.

Roblox has gone from $141 to $30.

Coinbase has gone from $368 to $112.

Robinhood has gone from $85 (really $50-$60 stable) to $10.

Rivian has gone from $179 to $30.

Twilio has gone from $412 to $111.

DocuSign has gone from $314 to $88.

Etsy has gone from $307 to $92.

Pinterest has gone from $81 to $20.

Roku has gone from $490 to $92.

Beyond Meat has gone from $160 to $36.

Peloton has gone from $129 to $17.

Draft Kings has gone from $64 to $13.

Teladoc has gone from $174 to $33.

Virgin Galactic has gone from $57 to $7.

Palantir has gone from $29 to $10.

DoorDash has gone from $257 to $74.

Cloudflare has gone from $221 to $86.

Fastly has gone from $66 to $15.

DigitalOcean has gone from $133 to $39.

UiPath has gone from $90 to $17.

Asana has gone from $145 to $26.

Atlassian has gone from $483 to $224.

Okta has gone from $276 to $119.

And so on.

This is a massive ongoing collapse and it's holding (we're 5-6 months into the persistent decline), there is no rebound occurring.

The bubble is over (and has been for a while now). It makes sense there would be a sizable VC pullback from the public market crash that is happening to the more bubbly (and less profitable) companies.

How these prices reached those levels without anyone batting an eyelash a mere 20 years after the last dotcom bust is beyond belief. It's never "different this time", folks.

Several of today's biggest companies in the world were startups during the dotcom crash, and survived it, lost value, but then came back and took over the world.

Perhaps investors are thinking that some of these companies might do the same thing.

Most of the companies in above list are actually fairly mature companies (10 years+).

I think it they had the potential to take over the world, they probably would have already, or at least show some serious signs of doing so.

It’s fine as long as somebody else is holding the bag

So they are on sale? Time to buy?

Let's get concrete: Q1'22 had 8.8k deals[0], which is 19% lower than last quarter.

>> How many deals do you think they will report for Q2'22? <<

I'll start, disclaiming that I have no domain or specific knowledge: 7.5k

[0]https://www.cbinsights.com/research/report/venture-trends-q1...

Do quarters vary, I mean maybe it's better to compare YoY?

Yes, they do. Q1: 30%, Q2: 20%, Q3: 20%, Q4: 30%

This is my internal stat over the last 15 years or so (since 2007), there have been a few exceptional years but overall it seems to hold. Q4 and Q1 of the year following usually have a lot of post holiday season deal making that then results in deals being inked either still in Q4 or in the first three months of the new year, then things slow down a bit while all the new portfolio companies are integrated and then the holiday season starts. So come September everybody is back in the traces and ready for a new batch.

There's reporting bias, where some deals are only disclosed/discovered later.

Having bootstrapped my own app I can't fathom how some other apps with millions of VC money will every turn a profit.

My app provides me a nice income, but it's far from anything able sustaining teams of dozens of people. And I'm pretty sure throwing money on ads wouldn't change that.

Your app is making money? That's very nice. But have you tried selling the PROMISE of more moneys sometime in the future? Lots and lots of moneys. Just say things like "We are trying to elevate the world's consciousness" and "community-based EBITA!"

Silicon Valley was a great show

Those quotes came from Wecrashed about WeWork.

They’re from wework’s own s1.

Wow!

I actually read Billion Dollar Loser this year, and the show is dead on. The book has more WTF moments in it, but the show's S-1 fiasco was juicer, if I remember correctly.

Sounds a lot like crypto to me.

You are looking at the darts that didn't hit the bullseye, or fell on the floor.

You are thinking small and that’s fine. It is wonderful to bootstrap an app and make income. However some ideas are much larger and need a big team and years of effort before the big payoff.

And then only 10% “payoff” for the investors, even fewer payoff for the employees.

Venture capital as an aggregate investment class might only generate returns in the 10% range, but no VC would invest in an individual deal with such a low expected return. For early stage A-round deals they're targeting something like a 1000% return, and then those targets decline somewhat for later rounds.

Which is fine for the VC. They are well diversified. It sucks for employees.

How does it suck for employees? They still get paid. Any stock options or grants are essentially a lottery ticket. Anyone taking a job offer expecting to get rich on that basis is a fool.

Private companies usually pay less in tech in cash than public companies cash+RSUs. Even in the current brutal stock market environment, at least your RSUs are guaranteed to be worth something and you can diversify when you vest.

don't know why you're being downvoted. You just presented objectively true facts.

I didn't downvote, but I'm fairly certain the downvotes come from the "you're thinking small" part - it comes across as condescending, even if it wasn't meant that way. If the parent chopped off the first sentence it would dramatically change the perceived tone toward a neutral to positive one. That is, the first sentence is largely unnecessary (it adds nothing other than the risk of people taking it quite negatively).

Like so:

It is wonderful to bootstrap an app and make income. However some ideas are much larger and need a big team and years of effort before the big payoff.

Wouldn't more money allow you to spend more on marketing and sales, which in theory could drive more profit? I think that's part of the bet.

A lot of these VC funded marketing efforts end up being selling dollars for 75 cents. Sure, it might get you tons of growth but that that is really difficult to translate to profit.

Can have serious consequences for headcount and salaries if we are entering a bear market. I also hope this article doesn't age well but it is definitely worrying.

This is literally the policy aim of the Fed right now. Unemployment is at historical lows with inflation running rampant. The ostensible aim of interest rate hikes is slowing inflation, but the byproduct is a cooling in the broader markets and economy, which in turn, affects the labor market.

Yeah the idea is to burn labors and wages to the ground and finish off get middle class.

That's certainly an idea.

Certainly seems to be what they are trying to do.

Agreed. The question is how bad the effect will be, no way to foresee it.

Nobody wants to say the quiet part out loud but... It's bad politics in the United States to have a strong labor market for too long: you have lots of anxiety among small and large businesses and you have inflation pressure. So they're going to manufacture unemployment to cool everything down.

Another more optimistic way of looking at it is the idea that as we transition into a higher interest rate environment, there will be short term pain as unprofitable businesses downsize / go under, their workers are let go, but they eventually make their way into healthy/sound companies that now have the scope to grow and contribute to real macroeconomic growth rather than just the nominal smoke and mirrors of the recent economy.

I hope you're correct. Those businesses closing will cool off the job market and people will be left behind. Lots of people never recovered from the 2008 crash.

This isn't good for startups being able to hire and retain talent. Engineering compensation, especially for those with experience, has increased significantly over the last 2 years and smaller rounds at lower valuations will make it increasingly difficult for startups to retain talent when they can make 2-4x as much at a large public company that can afford them.

Shame.

The value added by employees at larger companies is also taking a major hit due to the lower revenue multiples.

Yeah I mean how can most (and even billion dollar valued!) startups forever bleed money and need to raise Series XYZ. As if this whole startup scene is just like the pyramid, but with extra steps

I have long wondered about so when and how are you going to make money? And do you really think that there is no competition or new entrants in the market? Be it food delivery, taxi services or streaming... Or social networks...

If the big names are kinda messy looking, how well are smaller ones?

Sorry I dont get your point

This seems reminiscent of the (in)famous R.I.P. Good Times deck that Sequoia distributed to there portfolio companies back in 2008: https://articles.sequoiacap.com/rip-good-times

Which ended up being a serious mistake, and miscalculation (or bad prediction) of what happened. Late 2008 early 2009 were not good to raise money or for tech hiring. But by late 2009 and early 2010 things picked up again in force. Google and Facebook got into a tech talent war, and hiring, and funding (of mobile companies) picked up massively.

What they predicted a long 'nuclear winter', was just a 6-9months period.

The Tech class is creating a bubble simply based being divorced from problems of actual people. Nobody needs web3 on NFTs. These problems appeal to woke or libertarian tech bro's view of some theoretical, distant scifi future techies want to believe in. Solving these problems matter increasingly little to the vast majority of the society trying to solve more fundamental problems.

You wonder if the center of entrepreneurship will move away from tech companies to more practical concerns for a while?

I agree with you on automatic juice pouch squeezers, but ironically, NFTs are not a tech class demand in that non-accredited idiot "investors" are driving demand.

How exactly does the fed funds rate flow through categories of financial entities that end up inflating growth equities and therefore VC returns? I understand the total cash in the system is vaguely leveraged/multiplied by borrowing, but this borrowed money flows through which parties specifically and how do these vaguely spoken of economic forces actually interact?

I don't think even the Fed knows that. They are really playing with different instruments and seeing there effect on the economy. They have no idea how money flows and propagates. (see how high inflation surprised them).

Minimal impact (probably). Most money in VC has an extremely long duration (e.g., pensions, endowments), so investing it in ultra-short-term assets is not a desirable option. Low long-term rates have a bigger impact, but that's a chicken-and-egg problem: the amount of institutional money seeking long-term returns exceeds the amount of safe assets, putting downward pressure on yields and pushing institutional money into riskier assets. This safe asset shortage is unrelated to the Federal Funds Rate on overnight lending.

What technology sectors will likely experience a bear market ? And what will continue to get solid investments from VC's ?

Is this supposed to be relatable to us developers employed at these tech companies propped up by VC money?

Maybe it's just me as I'm just a developer in europe, but I don't get the VC world at all.

As an example, if you are looking for a job and trying to pick a stable company, understanding some of these dynamics could help. But I don’t think it’s essential for everyone to understand it or anything.

I guess for now you shouldn't worry unless you plan to join/co-found an extra-early stage startup

My reading is that VC backed jobs/salaries are going to become somewhat less secure if this trend continues/accelerates, but it's probably a little early for devs to feel the impact. Might influence job searching as startups become higher risk.

Honest and collaborative companies will be as open as they can about their cash burn rate and prospects for more funding. If this aspect of the business is not done well, it can have pretty sudden and unpleasant consequences for the folks doing the work on the front lines. As a dev, you might feel like you are building a something awesome one month, and the company suddenly has no cash left to pay anyone the next.

My experience in the US is that companies can cut it pretty close between funding rounds - just a few months, and those moments can be nerve-wracking if you like what you're doing.

Does this provide more opportunity (and risk) for the equities market in the earlier phases of a promising business?

Rather than just being a place for successful early ventures to cash out?

If you can get to solid growth and PMF in the pre-seed and seed round, you're better off taking $20m-$50m in an acquisition than trying for a series A. Reason for this is that once you raise a Series A, you're pretty much on the highway to hell (billion dollar valuation) or bust. There isn't much room in the middle for investors in the B+ rounds. They want companies that are going to be massive.

Makes me glad the platform I use for fundraising and subscriptions (Ko-fi) doesn't depend on VC. They're a bit slower than a VC-dependent company on shipping features, but I've seen the other side of that as a former long-time user of Patreon watching it not change in any good way for over half a decade while improvements and vital missing functionality are a perpetual "maybe." A real Tortoise v. Hare situation.

Does anybody have thoughts/insights on how this is affecting the Angel pre-seed community?

Does anybody else stop reading when they see that half the content is memes? Even if there's some brilliant text in there, the visual content is very distracting and subtracts from the quality of the presentation.

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