Predictions for 2023 from a Seasoned VC – Part II

Fred Wilson is a well-known VC and general partner at Union Square Ventures, which he cofounded in 2003. Earlier this year, he shared his predictions for 2023, which I recapped in this post. This week, he shared his updated thoughts on the venture capital sector.

Here are a few takeaways:

  • Venture capital has been in a downturn for roughly eighteen months.
  • The NASDAQ peaked at ~16,000 in November 2021.
  • The NASDAQ was down ~33% by June 2022 and ended 2022 at ~10,500.
  • As of July 14, the NASDAQ was at 14,113—up ~36%.
  • Interest rates and inflation are driving the NASDAQ.
  • The Fed raised rates aggressively in 2022 because of post-pandemic inflation, causing asset prices to decline.
  • Inflation is down now, which means rates may have peaked.
  • Expectations drive markets, and inflation and interest expectations have settled down.
  • Venture capital lags public markets by a few quarters.
  • Venture capital will likely respond to the NASDAQ’s strong 2023 quarters.
  • Venture capital may be through its downturn.

Taking a company public has historically been a popular way for investors, founders, and employees of venture-backed companies to get liquidity for their company shares. It makes sense that public markets heavily influence venture capital.

I can’t predict the future, but as Fred said, in the next few quarters we’ll have a better idea of where things are headed.