A Minsky boom is a period of economic growth characterized by increasing instability and speculation, ending in startup funding constricting.
Clear in Hindsight: April 2022 ended a Minsky boom for startups
In February 2022, Sean Murphy gave a talk, “Startups – What’s Hot and What’s Not“, where he talked about a Minsky boom. In April 2022, the merry-go-round stopped. Since then, funding has been more difficult, and there have been many down-rounds or involuntary exits.
In the short video below, Sean describes a Minsky boom, a period of economic growth characterized by increasing instability and speculation. Economist Hyman Minsky argued that in boom times, as confidence and optimism increase, lenders and borrowers take on more and more risk, leading to an eventual crisis when the debt burden becomes unsustainable, and the funding constricts.
Sean Murphy: In a Minsky Boom, as capital flows into a market, and we’re seeing enormous capital flows coming in, then you see in the near term kind of higher returns, the perception of lower volatility, and what looks like a better risk-adjusted performance because as money comes in, there are more investments. If you make a seed round, there is somebody to do the A; there is somebody to do the B. But at some point, the merry-go-round starts to run the other way, and you get something like 2001, where there are many fewer exits, the market appears unattractive and there’s down-rounds or involuntary exits of different sorts. So the question is, if and when that comes, given the amount of money flowing into the venture.
The answer was that the boom ended two months later, at the end of April 2022, when Angels and VCs started to extol the virtues of bootstrapping
Startup – What’s Hot and What’s Not
Startups play an important role in the Silicon Valley economy. Startup expert Sean Murphy weighs in on technology startups to give us his verdict on which technologies will have a major impact and which ones are stagnating. He will summarize startup trends and explore how they connect to the Silicon Valley ecosystem.
Full talk video, transcript, and slides are up at
https://www.skmurphy.com/blog/2022/03/04/startups-whats-hot-whats-not-feb-22-2022/
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