The co-founder of a $4 billion venture capital firm says the bear market has Silicon Valley somewhere in the 5 stages of grief. “We are probably somewhere between anger and negotiation”

The venture capital market is slowing and some VCs are struggling to come to terms with the news.

At least that’s what Josh Wolfe, the co-founder of $4 billion venture capital firm Lux Capital, had to say in an interview with The Financial Times this week.

Wolfe, Ph.D. in computational biology from Cornell University, argued that her peers are weathering the current crisis in the start-up economy, likening their response to being stuck between two of the five stages of grief that the pioneering Swiss psychiatrist -American Elisabeth Kübler- Ross developed in the 1960s: denial, anger, bargaining, depression and acceptance.

“We’re probably somewhere between anger and negotiation,” he said.

Venture capitalists invested about $16 billion in seed deals with U.S. companies in the second quarter, according to data from PitchBook. That’s a 22% decrease from the same period a year ago, and it represents the largest quarterly decline in venture capital funding since 2010 if you don’t include the pandemic-induced disruptions seen in the second quarter of 2020.

Venture capital-backed exit value in the U.S. also fell about 6% from a year ago in the first half of 2022 to just $48.8 billion, the data shows. from PitchBook. VCs typically realize their profits when the companies they have invested in are acquired or go public – often referred to as the exit – and with global initial public offering (IPO) volumes down 46% in the first half of this year from Compared to 2021, some VCs are finding “exits” more difficult than they have been in recent years.

As PitchBook noted in a July report, “the IPO window was all but closed” in the second quarter, with VC-backed public listings hitting a 13-year low.

This is important because venture capital has become something like the Wall Street of the west in the modern era, funding startups that grow into giants like in the famous examples of Apple, Google, and Facebook.

Not the only VC warning

Monday was also not the first time that Lux Capital has warned of the ongoing downturn in the VC space.

Firm partner Deena Shakir said Yahoo finance in July that there is a new normal in startup investing these days.

“What we’ve seen through the stages over the last two years is this incredibly fast pace [of growth],” she said. “You’d see a pitch and the founder would have 10 term sheets within 24 hours without the kind of due diligence you’d want to do. That’s not really the case anymore. There’s a slowdown happening …in terms of touring pace and in terms of capital deployment.

The slowdown in seed investment was also expected by some of the most experienced investors in the industry. Bill Gurley, a renowned venture capitalist who is currently a general partner at investment firm Benchmark, predicted seed investing would slow sharply in April and argued that VCs would be unwilling to accept their changing reality. .

“An entire generation of tech entrepreneurs and investors built their entire outlook on valuation during the second half of an incredible 13-year bull run. The process of ‘unlearning’ can be painful, surprising and unsettling. for many. I expect denial,” he said. said in a tweet.

Sheel Mohnot, an investor at venture capital firm Better Tomorrow Ventures, also said New York times in July that his company cut valuations on a record number of its early-stage investments this year due to the changing market environment. “People don’t realize the magnitude of the change that has happened,” he said.

And Jeff Morris Jr., managing partner of crypto-focused venture capital firm Chapter One, said The Wall Street Journal last month that it was the most “challenging” fundraising environment he had experienced in his career. “It will be painful in the short term.”

This story was originally featured on Fortune.com

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