The venture-backed startup ecosystem has become increasingly overheated, fueled by what the economists call money seeking rents, at a potentially precarious pace we haven’t seen in two decades. It has significant implications both for investors and the companies themselves.
Rent-seeking affects more than just venture-backed startups of course. It’s fueled the wild gyrations of cryptocurrencies, and the speculative fever of NFTs. It’s spurred the explosion in SPACs, and the retail investor plunge into short squeezes and meme stocks. Even Super Mario has been, ahem, getting into the game.
Similarly, rent-seeking cash has absolutely washed over the high-risk, high-reward startup sector, setting records for the first half of the year even in the earliest stages of fundraising.
With so much money sloshing around, there’s no better time to start a company. It’s even better than the late ’90s, when I started my company, but investors should remember some caveats. Otherwise, they risk losing a lot of money.
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