Nelson Chu is an experienced serial entrepreneur and the Founder and CEO of Percent, a modern credit marketplace. Read Nelson Chu's full executive profile here.
In the past few years, we’ve seen a venture market like no other. A short-term blip of capital constraints and a new normal of working remotely for startups during a global pandemic gave way to a market of fundraising excess, the likes of which we have never seen before.
Historically, fundraising has been one of the most challenging things about starting a business. Only the best made it out of the gauntlet to go on and thrive: It took the now-behemoth Amazon 50 investors to raise their first million. As we find ourselves creeping towards a reversion back to the mean, it’s important to remember that this isn’t necessarily a negative for the industry and is a healthy correction.
In markets where money is free-flowing, IPOs are easy, and public market comparables are trading 50 to 100 times multiples against EBITDA, the frothy effects flow down to the private market and venture capital. Venture capitalists were seeing what was going on in public markets and assuming that their investments would do the same and trade at 50-100 times their EBITDA or even their revenue upon exit.
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