The start-up and venture markets are back to square one •


What goes up must come down” is a cliché that is also a corruption of Newton’s third law. It is also a good reminder that when it seems that the business market has fundamentally changed, we often only see a temporary deviation.

This idiom makes sense when looking at the cycle of tech valuations (up and then down), venture capital (up and then down), and the rate at which new unicorns are minted (also up and down). These three trends are, of course, interrelated, but what got us thinking recently was the realization that we haven’t just seen declines in recent quarters: instead, there’s been an overall return to pre-COVID standards.

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Take tech valuations, for instance: we noticed this morning while drafting the weekly kick-off Equity episode that the value of tech stocks – as measured by our favorite software company tracking index – is trading today around the value it was at the beginning of 2020 , just before and after the massive COVID-induced selloff that hit US stocks:

Apologies for our annotation method – it’s Monday.

Clearly, the software valuation boom in 2020-2021 was more of an anomaly than a new normal. In addition, the fact that the companies in the index have grown in recent years but are worth less today implies that even before COVID, they may have been overvalued. If today’s prices hold up, they will signal not only the excesses of the recent past, but also the overvaluations of the 2010s.


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