The Turn
When it turns, it turns quick.
On February 13 the super bowl aired, and as usual the game took a back seat to the commercials. Specifically, the crypto commercials. We had Larry David and Lebron and Matt Damon and a bouncing Coinbase QR code and eToro and FTX and crypto.com telling us that “fortune favors the brave” and our aunts asking us if they should open an account and our nephews bragging about how much money they were making. That was February 13, 2022.
By mid-May Bitcoin was more than 50% off its highs, Terra had de-pegged from the dollar, and our bragging nephews weren’t answering their phones.
And while it is easy to pick on cryptocurrencies, no asset was safe from the turn. Least of all Venture Capital.
A VC pullback was no less inevitable. Not with valuations this fucking insane. But that inevitability doesn’t make the turn any less painful.
So here we are. A quick turn into a whole new zeitgeist. There isn’t much I can say about startups and bear markets better than is said by a16z right here. But as someone who was screaming about the virtues of creative destruction and the absurdity of Fed policy on the way up, I do feel the need to re-affirm the idea now that the turn has come.
I spent a few days last week at the CXO Summit in Austin to talk to investors about what I am building with atNav. I was expecting tears, rage, blood in the streets. I got none of that. If anything, investors were relieved. The general theme was "I can’t believe this took so long!”
The VCs I spoke to were prepared for the turn. Looking forward to it, in fact, as normalized valuations finally give them a chance to be opportunistic, selective, and prudent stewards of capital.
That’s the thing. You want smart VCs who are negotiating hard. You want smart founders who are managing the expense side of the ledger. You want it, and the market needs it.
Bull markets are great if you've got a get-rich-quick mentality, but bear markets are just fine if you're playing Long Term Games with Long Term People. I have written about this before - long term games, and atNav is a long term game being played with long term people.
And why exactly is atNav a long term game? Because I am solving a long term problem by building a fundamental utility inside the most vibrant part of our capital markets.
Here is one stat: just four market makers are managing 67% of all NYSE listed ETFs, eight are managing 92% of all ETFs and $6 TRILLION in assets under management. Can you imagine six trillion dollars sitting on such a fragile base and not feeling the urge to run out and secure that foundation?
We have taken liquidity for granted on the way up, and now that the turn has come we need to address the fragility of our market structure. We already have more ETFs needing liquidity than there is available liquidity on the street - and more ETFs are coming.
So I've got a window of opportunity to build a solution, and that's exactly what I am going to do. It is going to be hard, and it is going to be fun.
We already know what building after the turn looks like:
"According to this study, challenging economic times can serve as the rebirth of entrepreneurial capitalism"
And if it means building a startup after the turn, if it means not asking for silly valuations, if it means not needing to shoehorn a DeFi theme into an otherwise rock-solid business model, well that is just fine with me. If it is going to be hard, then it’s going to be hard.
I prefer it that way.