Venture Capital Exclusive: Not Investing in Q1? You Are Doing More Harm Than Good 

It goes without saying that there’s a great deal of anxiety about the economy. In this post-pandemic, post-bull-market, pre-recession moment, there are many concerning signals: stock prices have tumbled from recent highs, almost every large tech company has conducted layoffs, and entire industries (crypto) seem to be falling apart. In this market, the conventional wisdom for investors would be to slow down and hold off from deploying capital. 

But in my opinion, that wisdom is anything but wise. As an early-stage angel investor with family office experience, I know that the best opportunities are available now. My colleagues and I have been investing in as many deals as possible, often at incredible discounts; the first-mover advantages present in early 2023 are unlike anything seen in recent memory. 

Given this unprecedented opportunity, it’s mind-boggling to me that so many seasoned investors (who are meant to be anti-cyclical and bullish) are buying into the false narrative of the current market. The media certainly plays a role, with endless headlines about economic downturn – but remember, the media’s goal is often to generate clickbait, not to drive substantive and accurate narratives. It’s ironic that the media, from conventional outlets to meme factories like Litquidity, pushed the “buy low, sell high” mentality for the last several years, only for their followers (in large part accredited investors,  including VC’s) to sit idly by when the moment to actually buy low is now upon us. 

Admittedly, the current market may not yield the immediate rewards that some investors yearn for in our age of instant gratification. It’s unlikely that deals forged today will yield mammoth returns in the next six months, or even two to three years. But investors that have patience — patience often gained from the family office or private equity ecosystems – stand to benefit tremendously. Returns over the next five to ten years will be enormous, thanks to the low prices available in 2023. 

Despite the sizable upside available from 2023 investments, a record number of early-stage funds are delaying their capital deployments, preferring to wait until the market “shakes out.” I spoke with several early-stage investors who declined to comment for this article because they are spooked by headlines and waiting until later to invest. However, there are notable exceptions.

Jesse Draper, General Partner of Halogen Ventures, stated that:

“The market headlines are trying to lead us with fear. Some of the largest businesses in the world came out of the last recession. Today, the best place to invest your money is in the cracks shown by the COVID pandemic. Childcare is broken. Healthcare is a disaster all around. And education is unaffordable. There are so many great opportunities to invest in right now, and they will be the billion dollar and even trillion dollar exits of the next 10 years.”

Similarly, Lee Moser – Managing Partner at AnD Ventures,  has:

“an optimistic view on 2023 because there is still a lot of dry powder yet to be allocated for funds, both in Israel and internationally. We will definitely not  be on the fence in Q1, not waiting to see the direction the market is heading in; instead, we believe that the biggest time for innovation is during a time of distress and crisis. Therefore, we are definitely looking to invest.”

LP and advisor Tami Holzman agrees:

“I believe that investing in transformational early-stage companies during an economic downturn is an intelligent and opportunistic strategy. Valuations are attractive, and top talent becomes available.Innovation and grit drives success.”

It’s worth noting that all of the investors willing to be quoted, those bullish on deploying capital this quarter, were women. And don’t forget that female fund managers outperform men.

Early stage investors, remember: Your role is to be anti-cyclical and anti-conventional. Your LPs, and the startup ecosystem more broadly, rely on you to find unicorns – especially when the market is tough. The world needs new ideas now more than ever, from healthcare to parental support to biotech, fintech, and countless other verticals. 

Emerging Technologies Should Serve People and Society at Large

You have tremendous power to shape our world, and with that power comes great responsibility: to remain clear-eyed in the face of fear-mongering, to maintain a long-term perspective, and ultimately to enable the next generation of innovation.