Latest article He asserted on Bloomberg that the venture capital movement is on the brink of collapse, but I don’t think so.
This narrative falls short when you consider data going back beyond 2021. In the U.S. and globally, VC activity in 2022 is well on its way to surpassing the long-term trend of total investment that began in 2006. Rather than falling, the data suggest a healthy “reversion to the mean” in 2021, following a dramatic and historic recession.
The macro environment has changed in 2022, and three major trends have underpinned near-term trends.
First, inflation increased as the Covid stimulus boosted monetary demand. and then. Lockdowns and Russia’s war on Ukraine have put additional pressure on already strained global supply chains.
Huge writes can be followed when the market softens.
Second, starting in January 2022, global equity and VC markets have become more volatile as investors regroup to tackle an increasingly expensive capital environment where the path to profitability is important.
Finally, as higher interest rates try to tame inflation, recessionary fears grow and slow the pace of investment. All of this tends to reduce the value of venture capital portfolios, and funds typically hoard their investment portfolios, leaving less money available for new investments.
Focus on a narrow slice of the VC pie
These dynamics are leading some to think that venture capital is collapsing or stagnating, or that the latter is basically dead. Headlines are highlighting that deal prices have fallen to their lowest level in six quarters, or that quarter-on-quarter or year-on-year growth has slowed sharply.
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