Navigating The Contradictions: The 2023 Venture Capital Landscape


Amidst the onslaught of Fall tech community events in NY, I’ve had the opportunity to spend time with many of my colleagues in the Venture ecosystem. After a long summer being mocked for Italian vacations, many VCs expected deal velocity to materially increase, but overall most firms’ deployment is still well below historical norms (although here at FirstMark we’ve been quite active, thanks in large part to the approach I’ve expounded upon in this article). The result of this industry-wide reduction in deployment is a glut of dry powder and a meaningful capital gap that only stands to grow as more companies come to market. Below, I’ve attempted to untangle the factors that are leading to the seeming gap in capital supply and venture round momentum. I’ve also shared our approach here at FirstMark as we adapt to the current environment and continue finding and backing the best Series A founders in New York, Europe, and beyond.Some of the most prolific investors have pulled back significantly on investing. Ironically, in a market with deal prices down significantly and an abundance of dry powder, you would expect a buying frenzy, but the market doesn’t appear to be normalizing (my old friends/colleagues from Tribe Capital arrange the data pretty convincingly here). I believe there are three key reasons this is happening:The obvious move to make amidst a market-wide pullback is to back a new crop of businesses showing meaningful breakaway traction. But, with a couple of notable exceptions, it’s very hard to find true venture scale traction at the early stages in today’s market. While the specifics are subjective, it’s my view that historically, a “normal” Series A included:Many startups have other startups (of various stages) as their customers, which provides a much-appreciated boost when the market is strong but comes with a much-lamented accelerated decline when the market turns. That means that while the rest of the economy may be avoiding a recession, we’re absolutely experiencing one in the startup ecosystem.