We follow both public and private tech markets closely, and 2022 has been an interesting year for both companies and valuations.

As of the end of July, the Nasdaq 100 (the tech-heavy index of large US companies) is down 22% YTD. Meanwhile, the broader S&P 500 is down 14%. But the cloud-focused BVP Emerging Cloud Index (EMCLOUD) is down a whopping 42% YTD (EMCLOUD contains a range of great B2B SaaS companies like Adobe, Salesforce and Shopify).

However, from March 2020 to the peak in November 2021, EMCLOUD was up a whopping 200%. That’s 200% in about 18 months for an index – an almost unbelievable appreciation in such a short amount of time. And as we know in hindsight, this bubble was driven by the unique combination of Covid-induced lockdowns and massive quantitative easing.

However, someone investing in the EMCLOUD Index at the start of 2020 (i.e. before the pandemic) would still be up 15% today, and if you’d invested in 2018, you’d be up a respectable 50%. Not an astronomic return over four years, but also not a complete disaster.

In parallel, venture capital investment continues at a healthy clip. In fact, according to Pitchbook, there was $60bn invested in venture capital in the US in Q2 of 2022, more than in any quarter before 2021 (perhaps bar the dot-com bubble at the end of the 1990s). So, the venture capital market remains healthy.

In effect, what has happened is that the bubble we saw in particular in late-stage valuations (growth / pre-IPO stocks) over the past two years has “reverted to mean”, and we are now back on a healthier trend. We think this is overall a great thing for the venture ecosystem, as it means less capital going to unproductive companies (and sucking up talent, customer attention etc.)

What does this mean specifically for SuperSeed?

As we didn’t participate in the “pay above the odds” bubble in later-stage companies, our portfolio companies are not suffering the backlash from large down rounds.

And as we continue to invest in healthy software companies that deliver tangible ROI to their customers and drive solid, recurring revenue, our forward-looking view remains extremely positive. In fact, knowing that many of the best companies come out of crises (the Great Financial Crisis led to companies like Airbnb, Slack and Stripe), we see now as a great time to invest. So while we continue to stay disciplined and look to only invest in companies with great founding teams and solid technologies, we see the current climate not as a time to pull back but as a time to invest and back the amazing founders that are going to build the tech giants of the coming decade.