All-In E114: Markets update: whipsaw macro picture, big tech, startup mass extinction event, VC reckoning
Episode 114 • 2/4/2023
Market & Fed Update
- Fed raised rates by 25 basis points
- Strong jobs report: 517,000 jobs added (vs 188,000 expected)
- Chamath noted Powell's shift from hawkish in December to more dovish recently, suggesting only two more 25bp hikes
- Markets have rallied significantly since Powell's comments
- Labor participation increased to 62.4% with wage growth slowing
Tech Company Valuations & Market Reset
- Facebook/Meta stock surged after efficiency measures announced
- Sachs explained SaaS company valuations will likely never return to 2021 bubble levels (16x revenue)
- New normal of 8-10x revenue multiples expected going forward
- Big tech focusing on efficiency and cutting middle management layers
Startup & VC Industry Changes
- Major prediction shared that 4-5 early stage startups have less than 12 months runway
- Venture debt creating additional risks for startups
- Historical data shows commercially-oriented VCs outperform technical VCs in terms of returns
- Discussion of changing VC landscape with need for more fundamental vs momentum investing
Short Sellers & Market Health
- Extensive discussion of Hindenburg Research's Adani report
- Debate over role of short sellers in maintaining market efficiency
- Chamath suggested requiring SEC validation of short seller claims
- Discussion of proposed SEC Rule 13F2 requiring disclosure of short positions
Key Takeaways
- Tech sector likely in recession even if broader economy achieves soft landing
- Mass extinction event predicted for startups in late 2023/2024
- VC industry needs to return to fundamentals-based investing
- New normal of more modest valuations and focus on unit economics expected