“We must all suffer from one of two pains: the pain of discipline or the pain of regret.” - Jim Rohn
I believe we will finally start seeing a correction in valuations at pre-seed and seed startups. Q3 will show.
The year has been the worse in building a balanced portfolio with the correct ownership targets.
Given the increase in capital coming to our asset class, most investors completely lost valuation discipline.
I remember the days when no company would ever dare to rise above a US$10M during a seed or pre-seed round.
After January’s correction over growth stocks, the normalization of prices in a COVID-endemic world, and the latest Ukraine/Russia crunch, new pricing mechanisms and dynamics will take place.
There are quite a lot of investors losing money at the moment, especially those that invested in late-stage or IPO rounds of VC-backed companies.
The music has already stopped for hedge-funds and GE managers. That is why Tiger is doing Series As and becoming LPs in several seed funds.
Given current conditions, IPOs have been the new down-round. for several companies. The volatility of the most recent tech-IPOs is akin to a few crypto coins.
It takes time for markets to adapt at different stages, but this correction is coming — as there is a correlation between structural decisions in private and public markets.
Of course, the counterargument is that over 200B of dry powder is still waiting to be invested. Capital that is already signed but has not been called.
Time will tell.
I know for sure that LPs and VCs are not in this business to lose money.
The pendulum will start swinging back to investors as long as the macro-pain continues.
Every successful founder is a hero who decided to flow with the mysterious. To an inevitable founder nothing but the execution of an idea matters.
Paulo is the founder and CEO of Arena, a data platform for consumer enterprises that has over 25,000 customers in more than 50 countries.
Personally, I’ve been learning a lot from reading them. There is a clear correlation between the quality of the update and how well the startup is performing.