The Great Page Break
Last summer I predicted that VC check writing would return in earnest after Labor Day. This was wrong. It didn’t return by Halloween, Thanksgiving, or New Year’s either. In late winter instead of a market sentiment reprieve we got a banking crisis.
Yet out of the wreckage of the SVB blowup I detect a whiff of something new in the air. Optimism? A great reset?
For one thing, deals actually appear to be happening again. Not just for AI companies (though that’s obviously a big driver) but for all sorts of companies — SaaS, fintech, even crypto. Sure, a lot of these deals are down rounds and recaps. But the consummation of more investor-friendly deals is much better than a completely frozen market with no liquidity. One can only play the denial game for so long.
Perhaps more importantly, however, is the psychological break with the past that seems to have occurred this spring. This is anecdotal and subjective, of course. But what I detect post-SVB is a massive reduction in the use of backwards-looking phrases like “from the 2021 highs” and “X percent down from the peak”. While the fall and winter were about chasing ghosts (in the form of valuation marks and paper losses), the spring attitude seems to be more about, well, the future. Regret has been replaced with... perhaps not “hope”, but maybe “acceptance”?
It’s almost like the SVB debacle has ushered in a cosmic Command+Return (Ctrl+Enter for you Windows nerds), a page break that’s put some separation between us and all that icky badness in 2022.
Remember the tech layoffs and hiring freezes? They’ve pretty much already happened. I’m not saying they’re over, but it would be peculiar for a company to initiate one now rather than six months ago.
Remember when the Fed was hiking rates 75 bps at a time? That’s also over. Hikes aren’t over altogether, but we’re closer to the end than the beginning.
Remember when growth was decelerating meaningfully and tech companies were pulling down their growth and earnings forecasts? Well it’s looking more and more like we’re approaching the trough and re-acceleration will soon be upon us.
Maybe what we needed, as an industry, was a sort of close call (not a close call to the SVB employees, certainly, but to the rest of us) to snap us out of our post-bubble malaise and into the present tense. We’ll always carry the PTSD with us, no doubt. But the emotional distance between “this company used to trade at 50 times revenues and now it trades at 6” and “you know what, this is a good company and I’m excited for what it might become" is vast indeed.