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> The transformation of the venture capital industry over the past year has been stark. Total venture capital raised by startups plunged 80% from Q1 2022 to Q1

> The transformation of the venture capital industry over the past year has been stark. Total venture capital raised by startups plunged 80% from Q1 2022 to Q1 2023. Venture deal count fell 45% over the same span. Overall, Q1 was the slowest quarter for both capital raised and deal count since 2017. Does this come to a shock to anybody given the sequence of events: 1. Pandemic economic relief to offset otherwise lost wages due to restrictions is roughly equivalent to "injected money/liquidity from the sky" 2. Subsequent inflation 3. Subsequent federal reserve monetary policy in response said inflation in an attempt to stop it from spiraling How is venture capital expected to perform well in these conditions? Is the point of this article "venture capital was expected to do worse off given the change in underlying economic conditions, but not this drastically of a difference"? Federal Funds Rate is about to be 5.25% 30 year fixed mortgages are ~7% Financing a new car for 60 months is 7% I'm less interested in "how bad is the state of venture capitalism" right now and more interested in "when is it roughly expected to get better/be less bad again"?

slap_shot 3y ago
> How is venture capital expected to perform well in these conditions? I'm not sure that this author or Carta as a whole is trying to suggest private markets should be performing better right now. We're all painfully aware of why this is happening. These reports are usually just presenting the raw data. > I'm less interested in "how bad is the state of venture capitalism" right now and more interested in "when is it roughly expected to get better/be less bad again"? An analyst's report for any asset class (real estate, public equities, etc) has to start with the cut and dry numbers. But they do sprinkle in a bit of guidance using the data: "There are signs of a venture spring. Valuations from seed to Series C ticked up from recent lows. Median round sizes mostly stabilized. But these green shoots were overwhelmed by the decline in total rounds across all stages."
tpankaj 3y ago
I don't think it's fair to complain that you're not interested in reading about the state of venture capitalism on an article titled "The State of Private Markets". The article delivered exactly what it promised in the title.
- MuffinFlavored 3y ago
  > I don't think it's fair to complain that you're not interested in reading about the state of venture capitalism Apologies, I should've tried to sound less whiny. I guess what I was trying to say is "things are bad, what did you expect?"
nawgz 3y ago
> 1. Pandemic economic relief to offset otherwise lost wages due to restrictions is roughly equivalent to "injected money/liquidity from the sky" > 2. Subsequent inflation I dislike this representation a LOT because I have the feeling more money was distributed to business owners under the incredibly corrupt PPP loans, and then... it turns out corporate profiteering is the real driver of inflation. People keep peddling this "giving people money in a pandemic caused all our problems" line, but it's just not true, it's not grounded in reality, and if it was a contributing factor, let's look at the other things that costed more... Citizen's tax dollars being paid back to them when you can't leave your home is not a driver of inflation Citizen's tax dollars being gifted to business owners who also proceeded to jack up their profit margins due to shocking price elasticity due to a complete lack of antitrust enforcement for 40 years is THE driver of inflation It's amazing how on an article about VC you've both managed to argue that no one should write articles about VC and then blamed citizens for corporate-driven inflation.
- seizethecheese 3y ago
  The mainstream economics consensus is that inflation was kicked off due to excess savings and limited supply of goods (first) then services (second). The idea that business profits are driving inflation is a partisan talking point, not at all consensus.
  - nawgz 3y ago
    > The mainstream economics consensus Should be linkable from multiple sources. Care to provide some, then? > was kicked off due to excess savings That's a partisan talking point if I've ever heard one, and has largely died out in popularity in my view, since we've seen the endless lists of all-time-high corporate profits and margins > The idea that business profits are driving inflation Couldn't be more obvious. If everything costs more, and corporations are making record profit and revenue across the board, there's probably no limitation of goods or services. For instance, [0] argues my claim directly, [1] shows some details of that relationship, and there's an internet full of it. Everything supporting this "excess savings" bit is either from Republicans or 2021, care to link me something a bit more definitive? [0]: https://www.kansascityfed.org/research/economic-review/how-much-have-record-corporate-profits-contributed-to-recent-inflation/#:~:text=Firms%20raised%20markups%20during%202021,pressures%2C%20contributing%20substantially%20to%20inflation.&text=Inflation%20reached%20a%2040%2Dyear,potential%20explanation%20for%20high%20inflation https://www.kansascityfed.org/research/economic-review/how-m....
sbierwagen 3y ago
>I'm less interested in "how bad is the state of venture capitalism" right now and more interested in "when is it roughly expected to get better/be less bad again"? This rounds up to "how long do recessions usually last" and the answer is an unsatisfying "it depends" https://cdn.statcdn.com/Infographic/images/normal/25364.jpeg https://cdn.statcdn.com/Infographic/images/normal/25364.jpeg
somewhereoutth 3y ago
I'd suggest that ~5% is monetarily neutral and roughly the correct rate for pricing time/risk, it only seems high compared to the zero rates we've had recently. It may have to go (much?) higher for a (long?) period to fix the current inflation situation.

slap_shot 3y ago

> How is venture capital expected to perform well in these conditions? I'm not sure that this author or Carta as a whole is trying to suggest private markets should be performing better right now. We're all painfully aware of why this is happening. These reports are usually just presenting the raw data. > I'm less interested in "how bad is the state of venture capitalism" right now and more interested in "when is it roughly expected to get better/be less bad again"? An analyst's report for any asset class (real estate, public equities, etc) has to start with the cut and dry numbers. But they do sprinkle in a bit of guidance using the data: "There are signs of a venture spring. Valuations from seed to Series C ticked up from recent lows. Median round sizes mostly stabilized. But these green shoots were overwhelmed by the decline in total rounds across all stages."

tpankaj 3y ago

I don't think it's fair to complain that you're not interested in reading about the state of venture capitalism on an article titled "The State of Private Markets". The article delivered exactly what it promised in the title.

MuffinFlavored 3y ago
> I don't think it's fair to complain that you're not interested in reading about the state of venture capitalism Apologies, I should've tried to sound less whiny. I guess what I was trying to say is "things are bad, what did you expect?"

nawgz 3y ago

> 1. Pandemic economic relief to offset otherwise lost wages due to restrictions is roughly equivalent to "injected money/liquidity from the sky" > 2. Subsequent inflation I dislike this representation a LOT because I have the feeling more money was distributed to business owners under the incredibly corrupt PPP loans, and then... it turns out corporate profiteering is the real driver of inflation. People keep peddling this "giving people money in a pandemic caused all our problems" line, but it's just not true, it's not grounded in reality, and if it was a contributing factor, let's look at the other things that costed more... Citizen's tax dollars being paid back to them when you can't leave your home is not a driver of inflation Citizen's tax dollars being gifted to business owners who also proceeded to jack up their profit margins due to shocking price elasticity due to a complete lack of antitrust enforcement for 40 years is THE driver of inflation It's amazing how on an article about VC you've both managed to argue that no one should write articles about VC and then blamed citizens for corporate-driven inflation.

seizethecheese 3y ago
The mainstream economics consensus is that inflation was kicked off due to excess savings and limited supply of goods (first) then services (second). The idea that business profits are driving inflation is a partisan talking point, not at all consensus.
- nawgz 3y ago
  > The mainstream economics consensus Should be linkable from multiple sources. Care to provide some, then? > was kicked off due to excess savings That's a partisan talking point if I've ever heard one, and has largely died out in popularity in my view, since we've seen the endless lists of all-time-high corporate profits and margins > The idea that business profits are driving inflation Couldn't be more obvious. If everything costs more, and corporations are making record profit and revenue across the board, there's probably no limitation of goods or services. For instance, [0] argues my claim directly, [1] shows some details of that relationship, and there's an internet full of it. Everything supporting this "excess savings" bit is either from Republicans or 2021, care to link me something a bit more definitive? [0]: https://www.kansascityfed.org/research/economic-review/how-much-have-record-corporate-profits-contributed-to-recent-inflation/#:~:text=Firms%20raised%20markups%20during%202021,pressures%2C%20contributing%20substantially%20to%20inflation.&text=Inflation%20reached%20a%2040%2Dyear,potential%20explanation%20for%20high%20inflation https://www.kansascityfed.org/research/economic-review/how-m....

sbierwagen 3y ago

>I'm less interested in "how bad is the state of venture capitalism" right now and more interested in "when is it roughly expected to get better/be less bad again"? This rounds up to "how long do recessions usually last" and the answer is an unsatisfying "it depends" https://cdn.statcdn.com/Infographic/images/normal/25364.jpeg https://cdn.statcdn.com/Infographic/images/normal/25364.jpeg

somewhereoutth 3y ago

I'd suggest that ~5% is monetarily neutral and roughly the correct rate for pricing time/risk, it only seems high compared to the zero rates we've had recently. It may have to go (much?) higher for a (long?) period to fix the current inflation situation.