If history repeats itself, early-stage venture capital glory days are ahead

By Marc Schroeder

Many of the top big-name venture capitalists made their reputations (and their profits) by investing during the 2008 crash. Start-up valuations were lower, giving venture capitalists great terms to invest, and In the midst of a macroeconomic downturn, the founders were envisioning and building an entirely new future. This included ride sharing (Uber, Lyft), messaging that ultimately made email better (Slack), and much more.

Some of the companies they financed at that downturn became giant publicly traded billion-dollar companies over the next decade. He was the best of times as far as those investors were concerned, and his willingness to invest in the face of a recession and economic collapse delivered returns that have secured their places in VC history.

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History repeats itself, and I think we are on the brink of history repeating itself. The whole essence of venture capital is to invest in long-term horizons in companies that change the paradigm. If you can do that at a discount during recessions, your returns can accelerate dramatically.

boldness wins

Right now, many economists are predicting a recession that will last until 2024. At the same time, there are plenty of venture capitalists who recently raised big new funds and have plenty of dry powder to implement. With start-up valuations plummeting from the stratosphere, many of these funds are biding their time to step in and secure significant capital at a discount. We still don’t know when this moment will come, but if history is any indicator, it’s on its way. If you have a ton of dry powder, this may be the time to make big bets from majority shareholders that will be massive home runs over the next decade.

Marc Schroder of MGV

If you’re a fund trying to keep the powder dry, this is a good time for dollar cost averaging. Corporate profits will definitely take a hit, but their budgets and need to compete on technology will remain intact, and potentially even elevated.

The economic boom of over the last decade has created enormous value and wealth for the world’s largest corporations, and they are all actively seeking opportunities to compete using software, Web3, proptech, energy, and other startup verticals where innovation is flourishing. .

Early stage survival

There are plenty of companies in the seed stage through Series B that are well positioned to survive (and potentially even thrive) as job openings open up and competition dwindles. Many investors have already built their list of these companies and are waiting to jump in when the time is right.

These investments will be your marquis positions through this recession and into the next wave of growth, high valuations and foam. Instead of chasing the best deals, they will be able to sit back and watch their positions grow into highly profitable, mature companies that have proven their ability to survive the worst the global economy can face.

Despite the volatility, fear and risk that comes our way, those things represent an opportunity for enthusiastic investors. This cycle has been repeated many times and there is no reason to think that this time it will be any different.

As an early-stage VC, I deeply feel all of those concerns, but I’m also excited about the potentially generational opportunity they present. As investors, how many of these opportunities will we have in our lifetime? Maybe two or three?

They cannot be wasted, and there is no doubt that the best investors will capitalize on them as they always have. Sure, a lot of funds and a lot of startups will fail, but the ones that can position themselves well in this next cycle will be the next a16zs and Sequoias; I plan to be among them.

Marc Schröder is managing partner and co-founder of MGV, focusing on working with world-class technology entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as head of global sales at the Maschmeyer Group and was an investor in Seed + Speed ​​Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

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