Episode 19 - What We Can Expect in 2023

The Exit Strategy Podcast

Episode 19 of the Exit Strategy, 2023 is here and we are looking back at 2022 and discussing how the market has changed. The market has not seen a real interest rate environment since 2008, and we need to come to realize that the market forgot how to manage this kind of market. What this means is that for the past 15 years we have had a zero interest rate environment which means many funds were built around this environment, and we could expect to see that funds will need to rework their LP Agreements to reflect a real interest rate environment. We discuss that market consolidation will be a very positive thing for Venture Capital and Private Equity investors but do the market leaders understand this? Major LPs could see for the first time in a long time, a market where they can invest in government treasuries and perform at a higher rate than their cost of capital; so this could mean a slowdown in their investment into the private and start-up market. But what was the impact of there being a 15-year zero-rate market? It seems to have allowed us to form mega tech companies like Facebook, Google, Amazon, etc.

In 2023, we are starting to see more regulations coming into the technology market through congress, as we expect more social media regulation is coming in 2023. We try to figure out how TikTok is different in China versus the United States but what does data collection from TikTok really adversely impact us?

Nasdaq closes out its first four-quarter slump since the dot-com crash in 2008. It dropped 9.1% in the first three months of the year, followed by a second-quarter plunge of 22% and a third-quarter decline of 4.1%. It fell 1% in the fourth quarter because of an 8.7% drop in December. For the full year, the Nasdaq slid 33%, its steepest decline since 2008 and the third-worst year on record. The drop 14 years ago came during the financial meltdown caused by the housing crisis.

Overall we are positive in 2023, and we look forward to what is to come. We expect market consolidation to happen in the technology space, and there to be changes in spaces such as renewable energy and we are excited to our live discussion at CES 2023 with Gustavo Medeiros and Sebastian Laye for the European view of 2023.

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