Alternative headline: Attention Entrepreneurs - You'd Best Get In While The Gettin' Is Good.
From Pitchbook, January 16:
Veteran investors have been nervous on and off for several years about the risk of a potential bubble forming in the venture capital markets. That anxiety has been especially pronounced among VCs who saw their portfolio companies obliterated in the dot-com crash of March 2000.
Today those same industry veterans are increasingly vocal about the heightened risk of the market going through yet another sharp correction, drawing comparisons between 2000 and a hawkish Fed and the new wave of hyper-driven valuation increases.
For a time, many VCs worried about meager exits after building up massive gains on paper. That angst turned out to be unwarranted when liquidity finally took off in the past couple of years, with US VC exit values hitting $774 billion in 2021—most of it through public offerings, PitchBook data shows.This article appeared as part of The Weekend Pitch newsletter. Subscribe to the newsletter here.
This helped venture capital outperform every other major asset class over the last few years, and, as a result, the industry attracted about three times more funding last year than in 2015.
There's no denying that venture capital has expanded and thrived in ways that few could have predicted.
But despite notching hefty returns and raising record sums of capital, many veteran VCs are once again being haunted by the memories of historic debacles like Pet.com and Webvan.
The most recent causes for alarm are the stock market gyrations that began taking shape toward the end of 2021 and the highest inflation levels in decades.
In late November, Keith Rabois, a partner with Founders Fund, predicted that the stock market would correct by 25% and enterprise tech stock valuation multiples would revert to their historical mean. His comments drew scoffs from detractors.
By early January his prognostication appeared to be inching toward coming true as enterprise tech stocks dipped.
"Where are my market prediction critics now?" Rabois tweeted after the Nasdaq opened the new year by dropping nearly 10%. "This is 2000," he added.
Rabois may currently be the loudest VC warning of gloom and doom, but many other seasoned investors share his concerns. Last month, Bill Gurley, a partner at Benchmark, told Harry Stebbings in a 20VC podcast that many aspects of the venture market today are reminiscent of 1999....
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