All-In E73: Late-stage VC markdowns and mistakes, market strategy, Ukraine/Russia update with Brad Gerstner
Episode 73 • 3/26/2022
Markets & VC Discussion
Late Stage VC Market Reset
- Brad Gerstner explained how market valuations are normalizing back to pre-COVID levels as interest rates rise
- For every 100 basis point increase in rates, valuations decrease 15-20%
- Late stage private companies will likely need to take 50-60% valuation cuts to reflect public market realities
- Instacart's valuation cut from $40B to $24B cited as an example of the reset
Investment Strategy in Current Market
- Focus shifting from growth-at-any-cost to considering growth, burn rate, and margins
- Companies need to extend runway and be more capital efficient
- "Burn multiple" (dollars burned per dollar of ARR gained) becoming key metric:
- <1 is excellent
- 1-2 is good
-
3 is problematic
Quality vs Growth
- Market distinguishing between high-quality profitable companies and unprofitable growth companies
- High-quality companies like Snowflake still growing revenue and free cash flow at 100%+ despite multiple compression
- Many late-stage private companies will struggle without path to profitability
Ukraine-Russia Conflict
Peace Deal Framework
- Three main components discussed:
- Ukrainian neutrality (no NATO membership)
- Russia keeps Crimea
- Some form of independence for Donbass region
US Strategy Concerns
- Discussion around whether US is pursuing protracted conflict to weaken Russia rather than pushing for peace
- Debate over effectiveness of economic sanctions vs military intervention
- Concerns about escalating rhetoric and nuclear policy changes
China's Role
- China unlikely to supply weapons to Russia due to economic considerations
- Growing economic relationships between China and other nations (e.g. Saudi Arabia oil deal in yuan)
Notable Quotes
Brad Gerstner on market dynamics: "Multiple expansion hides many sins... and now just the opposite is happening in a dramatic and historic way"
David Sacks on Ukraine strategy: "We need the Biden administration to help try and lead to a better outcome here instead of ratcheting up the rhetoric"
The episode wrapped up with announcements about the upcoming All-In Summit in Miami, including confirmed speakers like Nate Silver, Keys Verboia, and Joe Lonsdale.