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Nobody knows how long it will take for the market to be founder-friendly again, but it could be a while. Quite a while. Demographics meant an incredible amount
by causi 4y ago
Nobody knows how long it will take for the market to be founder-friendly again, but it could be a while.
Quite a while. Demographics meant an incredible amount of capital flow in the last two decades as the largest generation in American history, the boomers, reached the height of their careers and investments. That party is over. 2022 is the peak of the curve for boomer retirement. As they retire that money is leaving the market. Gen X is small and their capital peak won't be nearly as high. Millennials won't be reaching that level of earning for at least another decade if not longer.
- code_biologist 4y agoNice to see a fellow fan of Peter Zeihan style demographic analysis in the comments.
- causi 4y agoHis demographic analyses are good but I don't know how much I trust his general predictions. Too often he says things which are factually wrong that would've been very easy for him to research.
- code_biologist 4y ago100%. I love him, but his blockchain and battery tech analyses are pretty off factually.
- mysecretaccount 4y agoSame here. So many easily verifiable inaccuracies in his essays/videos, as well as a dogmatic adherence to demographic and geographic determinism. Still, a perspective I appreciate.
- missedthecue 4y agoThe silent gen preceeded the Boomers, and as they retired, Boomers moved up the career ladder. It's not as if Boomers expanded into a void.
- mellavora 4y ago> It's not as if Boomers expanded into a void. Uh, you might want to look at population growth numbers. Also post-boomer.
- FooBarBizBazz 4y agoIf you really believe that, though, then what do you invest in? This sounds like, "it's all downhill from here".
- SoftTalker 4y agoSeems that you might invest in companies that provide things that retired boomers will be buying?
- ceeplusplus 4y agoAt the same time, US debt is reaching record highs, so the Fed will have to keep printing once this whole supply chain situation is over. And the US is still one of the most immigration friendly countries in the world, so we'll still see continued capital influx I think.
- rory 4y ago> As they retire that money is leaving the market I don't see how this piece follows. Why would career retirement stop rich people from investing (as LPs) in VC funds?
- lazide 4y agoThink of rich people as the thin layer on top of a larger tide. They won’t stop, but the level they are at will change, and it won’t be higher than it was. Many of them will be changing strategies too.
- rory 4y agoThat's still not a logical or empirical explanation, it's just an assertion. What evidence do you see that points to a net decrease in early-stage tech investment at retirement?
- lazide 4y agoIt’s an observation, and one I don’t care to spend a lot of time defending. Take that for what you will. My note was that the macro-economics of going net withdrawal from net contribution with what is currently the largest, wealthiest economic segment in the United States is not likely to increase the size of money seeking to invest, which would, I expect, correspondingly decrease the pool looking for that particular outlet. And on further reflection, especially since VC, being a fundamentally high risk, high variance of return business, is probably less attractive to those trying to avoid losing money in a bear market, with other, now higher interest earning investments available (due to less easy money). Hell, if you’re looking for a gamble, even Junk bonds are probably going to be a good play soon. I’ve only been through 4 (maybe 5?) downturns/market crises so far though personally, so add however much salt you want.
- rory 4y agoThis response conflates the current cyclical trend with the secular assertion I questioned, so I'm going to skip over the cyclical commentary. > Going net withdrawal from net contribution with what is currently the largest, wealthiest economic segment in the United States is not likely to increase the size of money seeking to invest From anecdotal observation, VC and PE investors are at a point in their financial life where their earned income is much smaller than their investment income, so I'm not sure this distinction is as relevant for that class. Perhaps a thinning of multiples in the wider market from the 9-5ers withdrawing their 401k investments will pull money out of riskier investments. But it's unclear that your average VC LP has ever acted rationally (since median returns more or less match the public stock market, but with a decade lock-up). I think the more interesting inflection point will be in another decade or so when the baby boom generation approaches peak die-off. How much of that money will go to wannabe tycoons a la MBS? How much will go to non-profit endowment funds? IMO there's a reasonable argument we'll get right back to another dumb-money peak like the one we just exited.
- alexchamberlain 4y agoWhilst the baby boom was clearly a peak, the subsequent generations are much smoother - why would we see such peaks and troughs then?