Great analysis! Thanks for sharing. Any sense of which verticals will lead the recovery? Do you expect that overseas markets will recover more slowly than US venture?
Thanks! I honestly don't have a good answer to this, other than that I continue to be bullish about my main focus areas of developer tooling / application infrastructure / AI. Infrastructure especially tends to be quite resilient
This analysis is well-reasoned and logically laid out--nice work! I suppose it would stand to reason that if the current downturn is protracted by an extended period of higher-than-normal rates, the trough could be much longer than the 10 quarters outlined.
In theory we could just track the Nasdaq and use the relationship outlined here to determine where private valuations should be regardless of the length of the trough, but it would be interesting to track this over the next 18-36 months to see if the relationship changes or breaks down due to the abnormal rate environment we are in.
Yep -- I did not condition these forecasts on interest rates; a more complete analysis would explicitly account for that. I tend to agree with you that there's some risk in interest rates staying higher for longer, and that could cause the relationship to break down somewhat.
For example, I'd say private valuations crashed slightly faster than expected. I'd also say there's probably a larger population of overvalued companies right now than ever before. They will all eventually need to fundraise, and it will take quite some time to get through all those down/flat rounds
Great analysis! Thanks for sharing. Any sense of which verticals will lead the recovery? Do you expect that overseas markets will recover more slowly than US venture?
Thanks! I honestly don't have a good answer to this, other than that I continue to be bullish about my main focus areas of developer tooling / application infrastructure / AI. Infrastructure especially tends to be quite resilient
Yep. That seems like a hard category for management teams to cut quickly in hard times.
This analysis is well-reasoned and logically laid out--nice work! I suppose it would stand to reason that if the current downturn is protracted by an extended period of higher-than-normal rates, the trough could be much longer than the 10 quarters outlined.
In theory we could just track the Nasdaq and use the relationship outlined here to determine where private valuations should be regardless of the length of the trough, but it would be interesting to track this over the next 18-36 months to see if the relationship changes or breaks down due to the abnormal rate environment we are in.
Thanks!
Yep -- I did not condition these forecasts on interest rates; a more complete analysis would explicitly account for that. I tend to agree with you that there's some risk in interest rates staying higher for longer, and that could cause the relationship to break down somewhat.
For example, I'd say private valuations crashed slightly faster than expected. I'd also say there's probably a larger population of overvalued companies right now than ever before. They will all eventually need to fundraise, and it will take quite some time to get through all those down/flat rounds