“The Venture Capital Bubble is About to Burst Again

After two years of brutal fundraising conditions, some naïve investors are claiming that the worst is behind us and startups can finally start spending money on growth again. But don’t be fooled—the party is far from over.

According to PitchBook data, valuations for early- and late-stage startups have recovered, but only for the elite few who managed to survive the drought. The majority of startups are still stuck in cash preservation mode, and those that can’t deliver growth are being left behind.

Fintech, in particular, has been a disaster for investors since the start of the downturn, but a few lucky companies like Monzo have managed to snag higher valuations. But don’t think for a second that this is a sign of a broad-based recovery; it’s just a few isolated exceptions.

The real story is that many startups are still struggling to raise capital at all, let alone at higher valuations. Deal volume is still sluggish, and the number of companies that can raise funding is dwindling. The “all-time” high valuations touted by PitchBook are a myth, and the real story is that only the strongest companies are getting funded.

And even for those companies, the funding environment is still treacherous. As one analyst put it, “if you’re struggling to hit growth targets you had set out before the pandemic, it’s a really hard market.” In other words, if you’re not a unicorn, you’re out of luck.

The reasons for this are clear: inflation is still a major concern, the Fed is still tightening, and the stock market is due for a correction. And don’t even get me started on the absurd valuations being given to AI startups—it’s a bubble waiting to burst.

So, to all the startups out there thinking they can finally start spending money on growth, think again. The venture capital bubble is about to burst again, and only the strongest companies will survive.”