Prices of tech stocks soared during the COVID-19 global pandemic in part due to growth. Investors were paying 100x ARR multiples for some tech companies. However, that growth was not permanent and we are seeing tech stock prices revert to the mean.
Ecommerce penetration is one example. Online sales during the pandemic grew rapidly, but now have come back to a pre-pandemic rate. Many tech stocks benefited from this trend, but it turns out it wasn’t long lasting.
Read Reversion to the mean: the real long COVID by John Luttig.
- How long will a recession last?
- Tech company valuations are growing faster than headcount
- The repricing of tech stocks puts downward pressure on startup valuations
Links to this note
Running a Startup During a Recession
Startups are a microcosm of the economy and we can observe that things are changing quickly towards a recession footing. The effects of inflation on valuations are readily apparent, but we also see that things were too good to be true and investors and late stage companies exploited it.
Outline for my annual essay about things I learned and reflections for the year.