Wrote about Chapter 1 here.
Now to chapter 2.
Whilst certainly indicative of a broader interest in technology, the growth has been driven by a systemic search for yield via alternative assets in the face of depressed returns in traditional risk assets. With rates still expected to remain low and macroeconomic indicators (inflation & labour markets) still (somewhat surprisingly) depressed, my expectations are that capital will still be keen to search for risk assets and venture is at the top of this spectrum. Even if you argue we are at the brink of regime shift, this is still a good time to invest into VC as the vintages from 2010 onwards show how performance improved in the post-recession climate by virtue of adverse selection of only the best entrepreneurs.
That said, the result of these increases are that arguments have pervaded in recent years about another tech bubble. I am in the camp that we are not in such a bubble. Whilst certainly valid questions can be asked about the fundamental valuations of some of the current cohort of “unicorns”, I consider there has been a structural shift in the capital allocations between private and public markets in favour of private companies which now represent a meaningful asset class that investors should consider. And in the public markets, the position today is fundamentally different to the Dot.com bubbles largely as a result of better understanding of technology business models.
Another long read but I think for me these 2 paragraphs are interesting. Of course with the public markets in a current downturn, I am sure there are people thinking the whole bubble theory is validated. My view is this is just a big correction and will come back but of course not forever.
I do think VC will continue to grow though since I agree with the notion that private asset allocations are growing and tech will continue to permeate every nook and cranny of all economies.