Co-Founder Of VC Firm Says Silicon Valley Grieves As Bear Market Sets In
The venture capital (VC) market is slowing, and some VCs are having trouble accepting the news. At least that’s what Josh Wolfe, the co-founder of the $4 billion VC firm Lux Capital, had to say in an interview with The Financial Times this week, Will Daniel wrote for Fortune.
Photo Insert: The state of the market has been described as somewhere between anger and bargaining.
Wolfe, who holds a Ph.D. in computational biology from Cornell University, argued his peers are resisting coming to grips with the ongoing downturn in the start-up economy, likening their response to being stuck in between two of the five stages of grief that pioneering Swiss-American psychiatrist Elisabeth Kübler-Ross developed in the 1960s: denial, anger, bargaining, depression, and acceptance.
“We’re probably somewhere between anger and bargaining,” he said.
Venture capitalists invested around $16 billion in early-stage deals with US companies in the second quarter, according to data from PitchBook.
That’s a 22% decrease from the same period a year ago and it represents the biggest quarterly decline in VC funding since 2010 if you don’t include the pandemic-induced disruption seen in the second quarter of 2020.
Venture-backed exit value in the US was also down roughly 6% from a year ago in the first half of 2022 to just $48.8 billion, according to PitchBook data.
VCs typically earn their profits when the companies they have invested in are acquired or go public—often called the exit—and with global initial public offering (IPO) volumes sinking 46% in the first half of this year compared to 2021, some VCs are finding “exits” more challenging than they have been in recent years.
As PitchBook noted in a July report, the IPO window was virtually shut in the second quarter, with VC-backed public listings hitting a 13-year low.
This is important because venture capital has become something like the Wall Street of the west in the modern era, funding startups that go on to become giants as in the famous examples of Apple, Google, and Facebook.