Common sense and history show the futility of economic forecasting.
Nevertheless, since we are approaching New Year’s Eve, we have an excuse to trace a Goldilocks scenario for US VC in 2024.
1. Annual price inflation stabilizes within the 2%-3% range
2. Fed trims interest rates
3. A soft landing unfolds
4. Capital flows from fixed to variable income
5. Tech stocks multiples increase, also catapulted by the AI frenzy
6. With a delay, tech startups multiples follow on
7. The IPO window opens by Q3-Q4
8. Private investors finally get some of their money back at a “good enough” return
9. New and recycled capital is funneled into the VC asset class
10. The tech virtuous cycle spirals up
What is the likelihood of this Goldilocks scenario for the US VC? We have no idea.
What we can state for sure is the cyclical nature of markets and that the finest moment to invest is in troughs.
And what we can feel now is that there will still be lots of pain for US tech startups, possibly until Q3-Q4 as per the Goldilocks scenario, stretching the opportunity window to invest in late-stage VC startups at great prices through secondaries.
Wishing you a prosperous 2024!