Finance

Finance (1)

Going through some of my notes from recent talks with clients one dominant topic became evident. It is the end of the current tech innovation and venture capital investment cycle. As this is a very important and at the same time a very complex topic, I decided to keep this post very high level and to publish it in form of statements.

Thus, here follow key points on the current state of technology innovation and public and private technology markets.

The end of the cycle is near
We are coming closer to the end of a record-long growth cycle in public and private markets. The study of cycles, realism based on history, or - more data-based macro analytics - the inverted yield curve, all call for a gradual reversion of the current trend in the coming year(s). This is known as the concept “reverse to the mean”.
In the reality of technology innovation, startups and venture investors of all kinds this natural end of an investment cycle is most directly felt through increased operational pressure, focus on cash burn rates and the supremacy of sustainable business models or profitability over imagination.

Some words about correlation
Private markets historically lagged behind public markets (less liquidity) when it comes to cycle corrections. But private markets will eventually feel a similar impact and in particular the liquidity trap will catch some investors. Often, these corrections affect the earliest companies hardest despite their quality. Therefore, not surprisingly, we observed a rush of public offerings in 2019 that want to capitalize on the top-of-cycle momentum and the last windows of the present age of technology.

 
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