There may be 'start-up trouble' ahead, but while there's 'moon' light and music and love and romance... Let's face the music and dance!

In this past year when much of the tech industry has pulled back on spending, start-ups have been hit particularly hard.?During the pandemic boom, remember that? I know seems so long ago, investors were happy to bankroll promising young companies' growth at any cost.?Now, with new funding rounds all but evaporated, cuts unfortunately are the order of the day.

Last year, over 3000 startups backed by investors failed, as per info I reviewed on PitchBook.

Around 19% of startups that raised money got less than before.

Dealmaking by 38% of Venture Capitalists vanished, leading to a quarter-million tech workers losing jobs.

US corporate bankruptcies hit a high since 2010.

2023 has been labeled a mass extinction for startups which I think is a bit harsh, but the numbers don’t lie.

On the 'big boy' Venture Capital deals:

• Bird: The scooter rental company raised $1.6B and reached a $2.5B valuation before collapsing into $900M debt.
• SmileDirectClub: The teledentistry unicorn once boasted an $8.9B valuation in 2019 before filing for bankruptcy last month, $900M in debt.
• Zume Pizza: The robot pizza maker raised $375M at a $2.25B valuation before shutting down after its pivot to food packaging failed to attract interest.
• Hyperloop One: The futuristic transportation startup raised over $450M before being shut down without ever launching a working hyperloop.
• Olive AI: The healthcare automation startup reached a $4B valuation in 2020 after raising $900M+ before abruptly shutting down last November.

And of course, we all know WeWork 'Didn’tWork': aiming to transform office real estate, went bankrupt at its $47 billion peak.

SoftBank, a major investor, lost $53 billion in the last two years on startups.

I get it nobody said this was going to be easy, and as a venture investor for many years I love nothing more than to see people and businesses WIN!

However the startup scene changed post-2022 in a major way when interest rates rose.

Higher interest rates tend to make the cost of running a business more expensive and hurt the future earnings potential of high-growth companies.

But why did interest rates skyrocket in 2022??It’s easy enough to understand why central banks lowered interest rates, but why did pretty much all banks raise rates from zero to nearly 5% between the start of 2022 and mid-2023.?In most places, interest rates today are at a 20-year high!

In the US, the raises were in response to inflation, which started to increase steeply in 2021, and peaked at above 8% in 2022.

Low rates and successful exits fuelled a VC investment boom from 2011 to 2021.

However, untested business models failed as interest rates increased, impacting startups in a big way.

Investors took risks on unproven models, expecting perpetual growth.

As these startups failed, $27.2 billion in VC funding was lost in 2023.

Some startups sold for much less than invested, like Hopin, once valued at $7.6 billion.

AI hype covered losses, with Meta gaining despite $46.5 billion losses in the metaverse.

Job losses hit over a quarter-million tech workers, but the overall job market remained strong.

VCs encouraged founders to exit struggling businesses.

Startup shutdowns made it harder for new ideas to get funding, with a 38% drop in active investors.

Corporate bankruptcies rose, indicating challenges beyond startups.

The rise of "zombie" firms, supported by low rates, led to delayed creative destruction.

Policies supporting zombie firms may harm healthy businesses and hinder long-term growth.

While seeing firms go out of business isn't ideal, it allows capital to flow to viable businesses.

The startup landscape is changing, with lessons learned from failures before... But I think that's the boring part of the story.?Let's switch gears here for a moment and talk about what we are passionate about and actually what this 'changing landscape' can mean for?investors.

Of course, Web3 plays a massive part with regards to the technology component and here are just a few examples as over $600M has been raised by web3 companies in 2024 so?far.

• HashKey?Group: $100 Million
• Flowdesk: $50 Million
• Sygnum Bank: $40 Million
• PORTAL: $34 Million
• Oobit: $25 Million
• Canaan Inc: $25 Million
• Magic Square: $24 Million
• Polymer Labs: $23 Million
• Ingonyama:?$21 Million
• Tune FM: $20 Million
• Axiom: $20 Million
• CryptoSafe Group Ltd: $20 Million
• Kiln: $17 Million
• Finoa:?$15 Million

Bottom line there is opportunity everywhere and in Web3 we are off to a great start, in the words of LL Cool J 'Don't call it a comeback, I been here for years' so keep the faith, stay in the game, don't f**k it up and think long term and remember before the fiddlers have fled, before they ask us to pay the bill and while we still have the chance... Let's face the music and dance! It's going to be a great year!