Startup and Venture Markets Back to Where They Started • TechCrunch | Jobs Recent

What goes up must come down” is a cliche that is also a bastardization of Newton’s third law of motion. It’s also a good reminder that when it looks like the business market has fundamentally changed, we often see only a temporary aberration.

This idiom rings true when we consider the tech pricing cycle (up then down), venture capital (up then down) and the rate at which new unicorns are minted (also up then down) Down). These three trends are obviously interconnected, but what got us thinking recently was the realization that we have not only seen declines in recent quarters: instead, there has been a complete return to pre-COVID norms.

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Take tech valuations, for example: this morning, as we were preparing the weekly inaugural episode of Equity, it struck us that the value of tech stocks – as measured by our favorite index that tracks software companies – is now close to what it was at the beginning of 2020, just before and after the massive COVID-induced sell-off that hit US stocks:

Please excuse our annotation method – it’s Monday.

It is clear that the 2020-2021 software pricing boom was more of an anomaly than a new normal. Also, the fact that stocks in the index have grown over the past few years but are worth less today suggests that they may have been overvalued even before COVID. If today’s prices hold, they will not only reflect the excesses of the recent past, but also the 2010 overvaluations.

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