Has the venture funding market hit a bottom?
If a sign of a bottom is that VCs have stopped investing at frothy multiples, then we haven’t hit a bottom. It’s true that many of the most aggressive investors of the past cycle have seen enormous losses. Yet I’m still seeing venture rounds getting done at 2021 valuations - for ex, a Series A that was recently done at a 600x ARR multiple and a Series C at a 75x ARR multiple. That said, it does seem like the average “round temperature” is significantly down from Q1 of this year.
If a sign of a bottom is that the crypto Ponzis have been flushed out, then we haven’t hit a bottom. While one crypto Ponzi has crashed, an even bigger one still persists.
Regardless of where we are in market cycle, we are open for business at HorizonVC. Great startups are forged in difficult markets.
A few podcast recommendations from this week:
An interview with Aswath Damodaran, the renowned Finance Prof at NYU, from Invest Like the Best. There was a fascinating, although somewhat disturbing, discussion of the damage that persistent inflation can inflict on an economy. I hope he is proven to be overly pessimistic.
An interview with Doug Leone, legendary investor at Sequoia, on Moonshot, a new podcast started by Sequoia India & Southeast Asia. This was dense with great insights on building companies. One that resonated is that startups hiring someone with experience should make sure that experience isn’t a substitute for first principles thinking. Playbooks can be useful, but sometimes they are applied dogmatically in the name of experience.
A few interesting reads from this week:
Martin Casado of A16Z discusses infrastructure opportunities in a market dominated by the big three.
A few weeks old, but this was a fascinating profile of the Stripe founders. I love this nugget on their rigorous hiring standards:
“the Collisons’ insistence on technically proficient managers meant that leadership roles remained vacant for months.”
It’s impossible to get hiring 100% right, but I think it’s generally better to err on the side of a filter that’s too tight rather than one that’s too loose.