I’ve heard today’s frequently asked question multiple times this week as many colleagues, friends and family put all financial categories in the same mental bucket. Depending upon where you are in your fund cycle and the industries you back, the answer varies. Luckily, venture capital is a long-term business and private company valuations/fortunes don’t fluctuate like public entities — particularly when the mess has mortgage roots (little direct tech connection). However, there are plenty of indirect effects on VCs and the portfolio companies.
1) Funds focused on financial technology investments are seeing customers disappear or cut technology spending. However, companies with cost-saving products/ROI are still knocking down deals.
2) “Quant jocks” are on the market and smart tech companies are picking up the talent to squeeze ROI out of a microeconomic model, advertising arbitrage or customer value/acquisition.
3) Portfolio debt from venture debt pure-plays (e.g. SVB, Square1) is calm, so far; but debt from diversified banks with mortgage exposure is nervous/gone — watch those MAC clauses. This is a very different bubble burst from the tech bubble, which left SVB licking their wounds for years.