During a market downturn, should venture investors continue actively deploying capital?

Michael Eisenberg · Feb 8, 2021

The best time to invest is when the market busts, so early stage investors should maintain a constant investment pace regardless of external market conditions

Many investors in 2000-2001 took their foot off the gas because they let Nasdaq psychology infect early stage investing psychology, but innovation continues through the cycle

Scope: specific to early stage venture capital

7:49 20VC: Aleph's Michael Eisenberg on Why Generalists Over Specialists, Why Boutique Smaller Firms Over Multi-Stage Firms, Portfolio Construction Theory, Capital Concentration Limits and How To Think Through Reserve Allocations with Market Cycles in Mind?

Mike Lazerow · Aug 2, 2021

Big businesses emerge from crises, so downturns are a great time both to start a business and to deploy capital as an investor

golf.com was started the year his IPO stock was crushed, Buddy Media was founded at the onset of the 2007–08 financial crisis, and the 2020 shutdown accelerated startups from zero to unicorn

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Wesley Chan · Aug 22, 2022

It is the best time to have a fund but not the best time to be investing

In market corrections the credit and capital markets seize up, so you can easily become the investor of last resort — a company you fund may come back in twelve months needing more money with nobody else returning calls, forcing you to keep writing checks or shut it down

29:18 Good time to have a fund but not to invest risk of becoming lender of last resort

Wesley Chan · Aug 22, 2022

The right deals today are aggressive investments into companies that don't need the capital and whose founders you already know well, not into companies running out of cash

He has done seven deals in two months, mostly with founders he knows who have no need for more capital; he would pass on a great founder with only two months of cash

30:34 Invest aggressively only in cash rich known founders avoid companies running out of money

Logan Bartlett · Aug 29, 2022

Deal activity at Series B and C has ground close to a halt, so the right posture now is patience and discipline — holding the bar high, saying no, and resisting FOMO while distinguishing A businesses from A+ companies

The hard part is judging what valuations will be worth in the end state, which requires waiting for the great opportunities rather than feeling you're missing out

43:57 Hold a high bar and be patient during a downturn rather than fomo into deals