Chapter 1: Analyzing the Current Landscape

In January, Wall Street has been surrounded by negativity in the tech sector, yet Silicon Valley is thriving. This divergence raises questions about the implications for venture investors and startup founders. Let’s explore the valuation dynamics and trends in tech investment.

I have refrained from checking my E*Trade account throughout 2022, fully aware that the outlook is grim. My portfolio consists of high-growth companies that recently went public, including Snowflake and Cloudflare in cloud computing, as well as electric vehicle firms like Tesla, Rivian, Nio, and Li, and the Greystone Bitcoin and Ethereum Trusts in the crypto space.

Having held most of these stocks for over a year, they are currently experiencing a significant downturn. Google indicates that they have lost around 20% of their value this year, although collectively, they are still up more than 100% since my initial investment.

I consider myself fortunate, but companies like Peloton— which I do not own— are suffering even more drastically, having dropped $137 from their peak last year. Many stocks have plummeted over 50%, with Netflix also down 20%.

However, my private company investments tell a different story. I hold shares in several venture-backed firms. For instance, InFarm recently secured $200 million at a valuation exceeding $1 billion. Miles has closed its Series A funding and is preparing for a Series B. Companies like Around and Millicast are thriving, with the latter increasing its revenue by over 300% in 2021. Kadence and Nodes & Links are also flourishing.

While public market stocks are mired in gloom, my personal experience is buoyed by early investments and the success of my private holdings. Unfortunately, my three sons, with their Robinhood accounts, do not share this optimism. They represent the vast majority of everyday investors feeling the pressure of declining tech stock valuations. As non-qualified investors, they lack access to the rapid growth opportunities in the private venture-backed sector.

This newsletter caters to both types of readers: those like me who have benefited from early investments and those like my sons who are grappling with market corrections. This week's curated articles delve into discussions about venture capital and its impact on Silicon Valley, revealing that significant repercussions are only felt when a company nears a public offering. Tomasz Tunguz leads the discourse in the article below.

The first video titled "A Tale of Two Markets" explores how the current stock market correction affects startup fundraising, providing valuable insights for founders.

Chapter 2: The Rise of Web 3

In the evolving landscape of technology, the discussion around Web 3 continues to gain traction. Scott Galloway and Packy McCormack reignite this conversation, which is now permeating mainstream media.

The surge in interest is not merely due to the potential for decentralization but reflects a broader movement towards transparency and authenticity in branding. As consumers become disillusioned with traditional institutions, they increasingly align with individuals who resonate with their values.

David Perell, known as the "Writing Guy" on Twitter, articulates this shift through the concept of "Naked Brands," emphasizing that successful influencers build loyalty through genuine engagement rather than mass marketing strategies that characterized brands of the past.

The NBA, for instance, contrasts with the NFL by promoting individual personalities, allowing athletes to express their identities and engage in social issues. This shift signifies a broader unbundling of influence, empowering individuals over traditional gatekeepers.

This transformation in consumer behavior has implications for venture capital as well, especially in the context of the booming crypto market. For instance, Crypto.com has expanded its venture arm to $500 million, targeting early-stage startups in the Web 3 ecosystem.

As the technology sector continues to innovate and adapt, it is crucial for startups to tackle pressing societal challenges with dynamic solutions. The ongoing investment trends indicate that the landscape will continue evolving, providing opportunities for both founders and investors alike.