Chapter 1: The State of Venture Capital in 2022

In the current climate, the venture capital landscape is under intense scrutiny, especially as public markets experience significant fluctuations. As we dive into the year 2022, many in Silicon Valley are pondering how these market dynamics will influence their investments. This week, industry veterans such as @Bryce, @SamirKaji, and @MylesDanielsen have shared their thoughts, alongside insights from @AleResnik, @HPierreJacques, and @MillicastRTC.

"How will these market changes affect my investments?" This question looms large for venture capitalists as they navigate the ongoing volatility. Previous discussions, such as in issue #293, "A Tale of Two Markets," highlighted these concerns. With companies like Facebook and PayPal witnessing drastic drops in value, the topic remains prevalent.

Beezer (Elizabeth) Clarkson from Sapphire Ventures has contributed valuable insights this week. Known for its commitment to understanding the early-stage investment landscape, Sapphire's platform, OpenLP, provides critical analysis of the venture scene.

Beezer recently shared a Twitter thread filled with key observations:

• A thought-provoking Tweet from Bryce Roberts.
• Another insightful comment from Myles Danielsen.

While these thoughts may initially seem vague, they lead to a more detailed discussion from earlier this year, which is featured in this week’s curated articles. Beezer notes that early-stage funds are deploying capital at an unprecedented rate, transforming some into effectively two-year funds. Interestingly, limited partners (LPs) continue to allocate funds, with over $900 billion currently sitting idle.

She attributes this activity to strong returns, citing 2019 vintage funds as an example:

• The top quartile TVPI for 2019 US VC stands at 1.56x, with a median of 1.26x, and the top 5% reaching 2.12x.
• In contrast, the 2018 US VC top quartile TVPI is at 1.87x, median at 1.59x, and top 5% at 2.50x (all figures net to LPs).

Moreover, she highlights the highly competitive nature of acquiring LP funds, particularly in the current climate.

The figures are striking: in 2021 alone, over 832 unicorns were created (including exited unicorns). The returns from seed funding to various stages of investment are astounding, further incentivizing early investments in promising companies. Firms like Tiger Global are strategically investing at earlier stages to maximize returns.

Despite the real public market corrections and a decline in valuations for later-stage investments, the early-stage venture sector remains robust and active.

This resilience is largely attributed to the vast market scale and the accessibility provided by distribution channels. With over 4 billion people using smartphones globally, the web, and app ecosystems expand opportunities for developers.

Yet, a significant concern remains: everyday investors are often excluded from early-stage ventures. This situation necessitates a shift in accessibility as venture capital continues to thrive.

More insights can be found in the accompanying video.

Section 1.1: Understanding the Web3 Trends

The drive towards decentralized, blockchain-based solutions continues to evolve. Many pitches focus on replacing traditional intermediaries with immutable ledgers, allowing for more efficient and trustworthy transactions.

Subsection 1.1.1: The Impact of Web3 on Investment

Chapter 2: Key Takeaways and Future Directions

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