Momentum Is Fragile...The Big Picture In Venture Capital and What Matters Today

Good morning!

My Toronto Maple Leafs made it one more game just to drive me nuts and tease. I am tempted to go to Toronto for Game 6.

It is getting hot here in Phoenix and I am looking forward to a productive work summer mostly in Coronado starting this week.

This past weekend was our 16th Social Leverage/Lindzon Palooza and it was really an incredible get together. Over 150 founders and LP’s joined us in Scottsdale.

We start each year with a look at the markets. I prepare 15-20 slides about where we have been, where we are and what we are seeing.

This one chart summarizes the world I work in the last 15 years:

The ZIRP bubble exploded in 2020 and imploded in 2021. The hangover in IRR continues today.

IN 2022 and 2023 my first slides to investors at our yearly April conference stated:

‘Don’t Panic, Don’t Chase!’

If you were following me here on the newsletter you know that I was cautious on the private markets and we practicede what we preached at Social Leverage as our pace of investing slowed down.

Over the last eight months our investing pace has picked up as our simple messaging to founders the last few years has begun to resonate. Here is the slide I shared with our partners this year which is what we have been communicating to founders since 2021:

It was easy for founders to dismiss us in 2021 and even 2022. Although we had no plans to time the market as a seed stage fund, the market moved so far away from reality we could not allocate much capital and the ideas and founders we liked could pick any pricing they wanted. We believed this was a bad decision for founders as they reduced their go forward optionality.

I like to tell founders that ‘momentum is fragile’. Founders and venture capitalists are now seeing that fragility.

In 2024 we are really seeing this ‘optionality crunch’ that has ensued:

I can’t predict interest rates or funding patterns or when technology breakthroughs happen, so I have no idea when this Series A bear market ends.

In the meantime, Social Leverage is excited to step up and into certain Series A rounds if the market conditions continue and we have already done that a few times.

My gut is 2024 is a much better time to be allocating capital to seed stage companies who are focused on what I mention above ‘what matters today?’ 

Have a great day.