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