Spring has arrived, but the tech economy has sprung a major leak! Tech stocks have cratered in the public stock markets. Inflation is rising and cryptocurrency is tanking. SPACS are mostly dead in the water and many IPOs are on hold. For those of us who play in the venture capital sandbox, what does this mean and what are we supposed to do?
If we look back at history, both after the internet bubble burst in 2000 and again after the financial crisis of 2008 – 2009, it means it is an extraordinary time to invest in early stage companies. Valuations for early stage companies will become more conservative and rational. Since most private companies take 5 to 10 years to exit, investing now at relatively lower valuations should result in greater returns at the time of exit. Additionally, while some sectors have been hit hard, such as life sciences and consumer packaged goods, other sectors remain quite robust, particularly cybersecurity and Fintech. It appears that the pendulum is swinging back in favor of investors, and for those who are bold enough to invest now, the results could be truly outstanding.
Consistent with the beginning of a new investor paradigm, we are starting to see more investor-friendly terms on some investments, and we are more than happy to discuss potential new provisions and conditions that may become prevalent in a “buyer’s market.” We have been here before, and we have the expertise to work with all stakeholders in this changing environment.
We lead off this MintzTech Connect edition with a Mintz Minute video on simple and fast ways to write an executive summary for a start-up company. We follow that with an article about the importance of stock vesting in start-up companies. Lastly, our company spotlight is on YUR Inc., a leader in accessible fitness technology in the gaming space.
Be safe and be well!
Dan + Sam