The venture capital market is doing better than you think

Did the global venture capital market bottom out in the first quarter of this year? The second?

There’s good reason to believe that the massive correction in venture capital activity that we’ve seen over the past six quarters has run its course. More importantly, we’re seeing early indications that we have already seen the bottom of the private-market investing downturn.

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We’re amid a new venture normal. Since the U.S. venture capital market’s declines have moderated into what appears to be a comfortable investing value range, we feel the present moment is not an aberration. Instead, the market as it is today is what folks should expect going forward. That’s the conservative view.

We can also paint a brighter picture. So this morning, let’s hunt for more positive data points to consider and remind ourselves of a few structural matters in the global economy that could improve tech valuations and startup fundraising.

Green shoots for better days

Raising venture capital does not confer success upon a startup; building a large, growing and profitable business does.

Regardless, given how startups are often built and run, venture capital activity can provide a useful proxy for a startup’s accomplishment, as it provides a measurement for how optimistic private-market investors are about the businesses that they fund. Going one level higher, venture capital totals can be considered a reflection of trailing startup growth rates and how efficient they have been lately. From either perspective, more is better.

When we talk about venture totals and capital availability, we are discussing simple currency in motion. More usefully, venture totals tell us quite a lot about in-market views regarding the health of existing startups.