Tech lay-offs are happening again. Is this is a sign for a peak in VC momentum?
- After years of stellar activity and growth, global VC fundraising in 2020 is slowing down and maturing. A typical sign: More later stage deals, even in relatively “young” markets like Switzerland, show some saturation. Let’s get a confirmation of the Swiss VC numbers soon here.
- PE dry-powder being at an all-time high sucking up a lot of activity in later stage tech financing. This will probably decrease returns for VC investors because PE will consider profit-oriented metrics (free cash flow, the like….)
- Tech lay-offs at SoftBank’s Vision Fund ventures, starting with WeWork, and now a decline in investment appetite is accelerating across their portfolio.
Is this worrying? YES and NO!
YES, because we are at the long end of a 10+ year trend, which is now set to go into reverse in the future. 2020 will probably be the year where valuations and VC returns will have to find a good test of reality.
NO, because I believe the flight to profitable growth is entirely healthy. We are not moving away from the tech sector at large, because liquidity in public markets are still high, and Softbank’s outrageous investment scheme (deploying of more than USD 5bn, per quarter (sic!)) was simply not sustainable. Once that is gone, the “ex SoftBank performance” of the VC sector might actually improve!