Fireside Chat, Interview, Podcast
Investing with Altimeter Capital’s Brad Gerstner
- Venture investing is predicted to enter one of its strongest periods in the coming years, driven by transformative AI and data trends, with the current environment described as a top vintage for early and mid-stage capital within the last 15 years.
- A period of risk-taking and entrepreneurial activity is expected to emerge starting with price discovery in the back half of the current year and continuing into 2023 and 2024.
- Price discovery in private markets is anticipated to begin in Q3 or Q4 once companies are forced to raise capital, potentially resulting in down rounds of minimum 50% for well-executed companies and a "wipeout" for those dependent on unprofitable models.
- Major capital allocators such as Tiger, Kotu, or Altimeter are expected to refrain from deploying funds until adequate price discovery occurs.
- Market stabilizing is forecast to occur within six, 12, or 18 months, after which secular trends in cloud software, machine learning, AI, and life sciences will be recognized despite current dislocations.
- Multiples in Internet, Software, and Fintech are expected to remain at 10-year lows with no active buyers currently present, while a handful of great businesses are projected to become bigger and more profitable over the cycle.
- The trajectory of interest rates and inflation is described as unknown, though hyper wage inflation is characterized as a farce expected to be replaced by deflation by year-end as the economy moves into Q1.
- A deep global recession is viewed as imminent, complicating monetary authorities' ability to raise rates further and preventing the return of interest rates to a 2.5% band as previously anticipated.
- Secular trends are projected to capture all the world's data for machine learning decision-making, with $3 trillion of annual enterprise IT spend increasingly shifting to the cloud.
- Sell-side models are expected to be proven wrong as certain companies continue to grow faster than linear deceleration suggests.
- Attracting top talent is predicted to become easier during the downturn as hyper wage inflation ceases, contrasting with the "post-traumatic stress" expected to affect a generation due to the current economic period.
- Tragic events like the conflict in Ukraine are noted as factors that must be resolved peacefully to calm markets.
- Founders and investors are expected to face difficult periods, requiring them to run the table through this era of down rounds and limited capital allocation.
- A national plan to provide every child in the U.S. with a $20,000 investment account compounding at 7% until age 60 is proposed as a viable strategy to narrow the wealth gap, costing an estimated $20 to $25 billion annually.