• Howie Town
  • Posts
  • There is No 'Wall Of Worry' To Climb In Venture Markets...and The Customer Is The Limited Partner

There is No 'Wall Of Worry' To Climb In Venture Markets...and The Customer Is The Limited Partner

Track the performance of the S&P 500, but end up with more money from tax loss harvesting – for the same amount of effort and at a lower cost than robo-advisors. And the first three months are free. Seems too good to be true?

It’s called Frec Direct Indexing.

Good morning…

For the last month I have been talking about the ‘wall of worry’ that stocks are climbing in my weekly shows with Ivan (Momentum Monday) and Trends With Friends.

Wall of worry is the financial markets' periodic tendency to surmount a host of negative factors and keep ascending. Wall of worry is generally used in connection with the stock markets, referring to their resilience when running into a temporary stumbling block, rather than a permanent impediment to a market advance.

I do not believe the ‘Wall of Worry’ that applies to venture investing and seed investing.

I read the following stat in a ‘Pitchbook’ report that caught my attention

  • The estimated percentage of down rounds climbed to a 10-year high at 17.1%, up from 13.5% in Q2.

This is a sea of pain/valley of death, not a wall of worry. The sea of pain is accelerating.

Unlike public markets which allow people to ‘capitulate’ and give up on stocks to get to cash, the private markets do not have that feature.

The sea of pain in venture markets will end when it ends. Many things have to happen and some are happening now.

There is still too much misallocated capital from the web 2.0 boom and zirp era.

I do not have enough data to tell anyone if we are at ‘peak down rounds’.

I do sense that good investors that survive and thrive in venture are coming to their senses and the best part of the venture markets will continue to be reasonably priced (not Y Combinator) seed stage investing.

For great returns, the best seed investors will not just put money to work right now, but will focus on the right founders and sectors and deploy at the prices that create optionality for exits.

While it was fashionable for venture investors to call founders their customers, I believe my customer is the Limited Partner. That does not mean I am not intensely loyal to founders.

Join the conversation

or to participate.