British investment firm TempoCap's venture partner Pierre Suhrcke believes that VCs erred in 2021, often making investment decisions based on the fear of missing out or following the herd mentality.
He argues that such judgments caused deal sizes to balloon to 50x to 100x revenue multiples and global VC funding deployment to jump 111% in 2021.
Suhrcke suspects that VCs will follow the same pattern of investing in generative AI startups soon.
- Technology firms, especially buy-now-pay-later and e-commerce aggregators, were nabbing funding at 100x projected revenues.
- He writes, "If you wouldn't usually pay 20x revenue, why pay 50x now?"
- According to Suhrcke, 2021 was an outlier in terms of funding, with the rapid pace of deployment causing VCs to be negligent with due diligence processes.
- He advises VCs to stick to their procedures and systems and not allow investing trends to cloud their judgment.
