As some US tech investors and startups hunker down in the market downturn, others continue as normal; PitchBook: Q2's average deal sizes are at record levels
though most like to claim their own funds were able to sidestep the worst of the excesses” https://www.ft.com/... Myles Udland / @mylesudland : Fun to look at this chart and think about how the venture bubble was a popular talking point back in like '14-'15 https://www.ft.com/... https://twitter.com/... Lisa Abramowicz / @lisaabramowicz1 : “Many companies are going to be in denial about the change in valuations until they run out of capital.” https://www.ft.com/... Tren Griffin / @trengriffin : Consultants are trained to create a matrix. Example: On one axis is positive cash flow and negative cash flow. On the other axis is attractive unit economics and ugly unit economics. Most dangerous quadrant: negative cash flow and ugly unit economics. https://www.wsj.com/...
Context & Ripple Effects
The headline number sits against a six-month arc of retrenchment: as early as February, with tech stocks and especially IPOs sliding, some venture firms were already cutting back investments and renegotiating startup valuations. Yet PitchBook's Q2 data shows the average check hitting records even as part of the market hunkers down — a split that echoes the pandemic quarter when US funds raised $21B while investing $34.2B across 27% fewer deals.
The commentators quoted frame the mechanism: Lisa Abramowicz warns companies will stay in denial about changed valuations until capital runs out, while Myles Udland notes the 'venture bubble' was a talking point as far back as 2014-15. The later retrospectives — 2022's plummeting investment and scarce listings, with 2023 shaping up harder — confirm which side of the split won.
First-order effects
- Startups still fundraising face a two-tier market: those perceived as durable can command record-sized rounds, while the rest confront the valuation renegotiations investors began pressing in February.
- Investors who claim their own funds sidestepped the excesses are effectively repricing portfolios privately while public comps have already fallen — Abramowicz's point that denial persists only until capital runs out.
Second-order effects
- Deal flow concentrates: if average deal size hits records while overall activity shrinks, capital consolidates into fewer, larger rounds — the same fewer-deals pattern Q1 2020 showed under stress.
- Founders reading the divergence delay raises rather than accept marked-down terms, extending the gap between private marks and public-market reality that the year-end retrospectives document.
Third-order effects
- If the pattern holds, downturns institutionalize a barbell venture market — record checks for a concentrated top tier and scarcity below it — making fund brand and reserves, not deal count, the competitive variable.
- The recurring cycle (2020's pullback, 2022's split, 2023's harder outlook) points toward private valuations resetting only through forced events like exhausted runway or scarce exits, rather than orderly markdowns.
The trend: Venture capital is cycling into a barbell structure where downturns concentrate capital into record-sized rounds for a few while the broader startup base faces valuation resets and scarce follow-on funding.