Bill Gurley, Brad Gerstner, & Jason Calacanis on the state of tech markets, hosted by David Weisburd

Market Trends

In 2023, the tech market witnessed significant changes, with startup shutdowns reaching levels not seen since the dotcom crash. David Weisburd highlights that approximately 1,500 companies failed, a number comparable to the early 2000s 1. This trend is attributed to the end of the zero interest rate policy, which had previously fueled startup growth. Bill Gurley and Jason Calacanis discuss how the market's cyclical nature has led to a rapid shift from risk-taking to caution, impacting valuations and investor behavior 2.

The expectation for what a good company is, and how much risk you can take, and how profitable you need to be, those rules today are dramatically different than they were three, four years ago.

--- David Weisburd

The conversation also touches on how the public market has adjusted quickly, while private companies are still grappling with overvaluation and slow growth 3.

   

IPO Prospects

The potential reopening of IPO markets in 2024 and 2025 is a topic of optimism among tech investors. Jason Calacanis argues that public markets offer a cheap source of capital and maintain business efficiency, countering the notion that innovation is stifled once a company goes public 4. He suggests that the backlog of companies waiting to go public could soon clear, driven by market conditions and pricing adjustments 5.

It's a cheap source of capital, it keeps the business efficient and honest.

--- Jason Calacanis

David Weisburd adds that founders must embrace the reality of current valuations and consider going public as a strategic move to clean up cap tables and focus on growth 6.

   

Deal Dynamics

The landscape for Series B and C deals has shifted dramatically, with a 90% drop in software deals from the 2021 peak. Jason Calacanis notes that the market is returning to 2017 levels, reflecting a reset in pricing and investor expectations 7. This adjustment is seen as a healthy correction, aligning valuations with realistic growth prospects.

The market is getting healthy because pricing is resetting.

--- Jason Calacanis

Bill Gurley observes that founders are now more adept at managing remote teams and leveraging AI, which reduces operational costs and increases efficiency 8. This trend is fostering a new wave of startups that aim to reach profitability without relying heavily on venture capital 9.