While I have not been on the road for seven weeks, I continue to do Zoom calls with founders pitching interesting seed stage opportunities.

But from what I read, I can sense the venture markets changing a bit.

Tomasz Tunguz has a post titled ‘The Health Of The Venture Market in 2020‘ that is worth a read and has great charts.

The gist:

We are 12 years into the longest bull market in US history and this bullishness has powered the venture market. Investors deployed $117 billion in 2019 up from $106 billion in 2018.. This market has grown 20% over the last five years. It’s been go, go, go for nearly a decade.

However, Q4 2019 saw meaningful dip from Q3, but it’s too early to say whether it’s an aberration, or the beginning of a longer-term trend.

He closes with…

Looking at where we are in terms of valuations, round sizes, total dollars deployed, and almost every other metric, the venture market today is at least close to if not the most ebullient venture market on record.

So, when does it change? No one knows. The sentiment in the valley continues to be positive and until investor confidence changes, I don’t foresee the trendlines deviating materially.

There are certainly more questions being asked of technology than in the past. There is broad anti-tech sentiment in politics and in popular culture. Softbank’s turbulent 2019 was one of the key topics of the year. Gross margin was the defining characteristic of successful IPOs, and direct listings certainly made a splash last year.

The real and more important question is what to do in this market. That answer never changes: build businesses prudently and finance them when you can at reasonable valuations so the company can grow into them over time.

Midas Venture Investor Bill Gurley is a little more direct in his Twitter feed commenting on the changes we are seeing at the Unicorn level of Venture Capital…

At Social Leverage, we invest early, generally the first money in and as a lead investor. We did not forsee an era of Softbank Vision Fund mucking up cap tables and turning later stage companies that had a lot of exit opportunities into binary outcomes of IPO or death.

I imagine some early state venture firms might try and contract for ‘Softbank’ type behavior in the future, but right now I believe it makes more sense to talk about the what if’s of later stage capital and success with the founders and make sure everybody is on the same page thinking about what success would look like at later stages.

Have a great Sunday.