There has been a big sell-off in tech in the first couple of weeks of 2022. Commentators are re-rating the risk of owning growth at the record-high multiples they displayed in 2021. This market volatility does not scare me away from tech in the slightest. The fed has to combat now 7% inflation, and the hammer in the tool chest is to raise interest rates.
The big question I have today is how this will trickle down to the private markets. If mediocre companies are getting priced at 15-20x revenue and multiple further upstream, it will ultimately cause a blood bath for founders and early-stage investors.
Now is the time to be prudent and do yourself as a founder and an investor—market size and valuations matter.
A great podcast on valuations resetting and the continual growth of cloud computing is Jeff Richards of GGV Capital on Howard Lindzon’s “Panic with Friends Pod.” You can listen here.
