Part I of VC & Inflation: Why Enterprise SaaS Could Emerge as the Winner in the Current Macro Environment
W ith 2022 now in the rear-view mirror, it’s clear that inflation is no longer a temporary phenomenon. Following an unprecedented 30-year period of “cheap capital”, inflation has creeped up to near or above 10% for some of the world’s largest economies whilst the stock markets just had their worst year since the Great Financial Crisis of 2008 (the S&P experienced its seventh worst year since records started in 1929).
It is only January 2023 and yet the record-breaking venture capital stats of recent years already seem like a distant memory. High profile startups (think Klarna, Instacart, and Stripe) are slashing valuations and raising capital at significant discounts while the number of new unicorns in Europe dropped by two thirds (from 100 in 2021 to just 31 last year). Unsurprisingly, VC’s earlier FOMO mentality and focus on growth has now been replaced with a “flight to quality”, depriving ventures with no defined route to profitability of capital.
So, why am I telling you all of this? I met Maria Dramalioti-Taylor and Zach Alexander just as they were launching the Beacon Fellowship, a programme where, in their words, “young industry professionals with inquisitive minds deep-dive into topics they have a passion for and use the Beacon team as a sounding board.” We started talking about the inflation-triggered market dislocation of 2022 and the fact that few investors have experienced high inflation in their careers (myself included), which drove me to investigate what its impact will be on the VC ecosystem and how founders and investors are navigating these uncharted waters. And that was it: I became the first Beacon Fellow, writing the following “trilogy” of posts to tackle this subject.
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