Entrepreneurs and venture-backed companies seeking financing in the near term, take notice. The hot market for companies is going to cool off in 3 to 6 months. Hurry up and get your round closed before it gets harder and terms get tougher.
In my 20 years of participating in the venture market both as a VC and an entrepreneur seeking VC funds, VC funding cycles follow the success or lags in the NASDAQ and IPO markets by about one to two quarters. This is true 5 out of 7 times, based on my observation. It’s a little like the old saw that stock market crashes have served as an ominous harbinger of 9 out of the last 6 recessions. Sometimes, a market crash is not predictive of a coming bad economy or Venture Capitalists getting stinger with their checkbooks.
I predict we’re headed for a tougher venture funding environment. Either fewer deals will get done, or valuations will come down or both. Hurry to get your company well funded and your deal done before the party ends and the next drought sets in.
See the related article from the WSJ today.