Venture capital follows the NASDAQ, downturn over?

I think Fred Wilson (of Union Square Ventures) has it right when describing how venture investing follows the Nasdaq.

Private capital markets, like venture capital, lag public markets by a few quarters. That is because it takes time for private market investors to react to the public markets. The NASDAQ peaked in Nov 2021, but VC markets did not really start slowing down until the second quarter of 2022.

Now that the NASDAQ has posted a couple of strong quarters, I would expect venture capital to respond. But it won’t happen overnight. We are in the summer doldrums. It takes time for VCs to raise new funds. And deals take months to come together. 

So my guess is we are mostly through this downturn. We will know for sure in a couple of quarters.

Fred Wilson: How This Ends (Part 3)

Hopefully this will start to unclog Series B and beyond investing in the Nordics and Europe this fall and in 2024. And lead to a situation where seed and Series A startups don’t talk about becoming/need to become profitable as a primary objective. Controlled burn and strong focus on growth and unit economics, absolutely. But IFRS/GAAP profitability is way too early at seed and series A.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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