The WCLD cloud index continued its ascent, having another positive week and closing yesterday at $33.84.
Public SaaS is up 31.6% from the mid-June lows. Score one for the “inflation is territory” crowd!
Yet the market continues to be tight for startups trying to raise early stage VC.
If the positive momentum continues, expect that early-stage venture capital will be slow to react.
Many moons ago when I was just starting my career in tech & finance, I was told that venture capital always lags the NASD.
It seemed a bit insulting to VC to say that its behavior was so predictable and reactionary, but I’m afraid it’s true.
While I still haven’t seen a set of equations to rigorously prove the physics behind this claim, it continues to hold.
Q1 of this year was a good proof point. Public tech stocks were in correction and late stage venture was cooling, yet early stage venture was still in “party like it’s 2021” mode. Lagging the NASD, for sure.
So, the bull market in the NASD and WCLD might continue for some time before the early stage venture market softens up. Or, the bull market will end up a “dead cat bounce” and then lagging VCs (like myself) can smugly think we are actually the market vanguards.
Podcast recommendations of the week:
Sequoia partner Ravi Gupta was interviewed in Invest Like the Best.
I always enjoy hearing stories of how Sequoia operates. I find it endlessly impressive that a firm that’s been so wildly successful maintains its hunger.
There were two nuggets that I found particularly thought-provoking:
One, the framework of being “demanding and supportive” and how that applies to portfolio companies as well as our children. I’d also suggest startup founders can use the same framework for their investors - I’m a big fan of founders following the adage of “put your cap table to work.”
The other nugget was the idea that pre-product-market fit, a startup should always be making progress either on numbers or on hiring. Even when a startup is too early to have metrics of progress, I will look for signs of progress in building talent gravity.
Another podcast recommendation from this week:
Jason Lemkin did an AMA podcast where most of the questions were about the challenges of fundraising in the current market.
If you need any more evidence of how dramatically the early-stage fundraising market has shifted in the past year, this should do the trick.