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Why should VCs care about interest rates? They're looking for 30000% returns from 1/100 of their investments while the rest go to 0. They aren't interested in
by dheera 2y ago
Why should VCs care about interest rates? They're looking for 30000% returns from 1/100 of their investments while the rest go to 0.
They aren't interested in your measly 5%
- baq 2y agoyeah well if their cost to lever up is suddenly 6-7% instead of 1% some perceptions change
- dustingetz 2y agointerest rate changes shift optimal balance of stocks vs bonds at hedge fund scale, altering prices which rebalances vc allocation in LP portfolios (targeting some fixed %) as well as impacts the velocity and price of IPOs which proceeds are reinvested into subsequent venture funds
- michaelt 2y agoBecause VCs need to get investors, meaning they're competing with other investment opportunities. When interest rates were 0.5%, a high-risk investment with a 12% return looked pretty attractive. So lots of people were handing over money to VCs. As they had wheelbarrows full of other people's money they were required to spend they didn't look too closely at what they were spending it on. Now you can get 5.5% risk-free from a bank account, that high-risk VC fund looks a lot less attractive. As VCs have much less cash they need to spend, they can be a lot more selective.