Text by Pyr Marcondes, Senior Partner at Pipeline Capital Tech.
I’ll start by quoting myself, in an article I wrote for the Pipeline Capital Blog, published on my birthday, April 18 (link below, if you’re curious to read the original): “… Also, there is also the segment of startups and scale ups, which are the base of the pyramid of this industry, and which, many times, seem to happen in the midst of crises and scares in the economies. It remains attractive and extremely transformative right now. With war or without war. …”
I will now continue quoting an article by my partner Alon Sochaczewski, whose title is “It’s a bad mood and it will pass”, in which he talks about the M&A segment: “M&A is “the solution” with or without a crisis, of inorganic growth of companies. What we will have is an increase in mergers, however, the volume of investment will remain high. We have a lot of Private and Venture Capital capitalized. It is a market that moves towards transformation and that, again, will not stop because of the crisis”. (Link to original article also below.)
Closing the quotations, Exame has just published an article on a similar topic, whose title explains everything that the text reveals: “Falls in prices make big companies appetite for startups”. (Also, link below.)
If you’re good at puzzles, you’ve already put the pieces together. If you’re still in doubt about what the point is here, I’ll explain.
The entire financial market moves in cycles and swings. Cycles account for the comings and goings of macroeconomic cycles. Pendular movements are those that adjust the market to the current economic dynamics.
If investments at this time of macroeconomic uncertainty tend to shrink due to the natural and predictable caution of investors, on the other hand, there are opportunities spread across all sides of the chain, particularly at the base, at this time: startups and scale ups, as I said in my birthday.
There was, indeed, an atmosphere of euphoria in the valuations of these quasi-companies (startups are still not exactly companies) and, in the last 10 years, their value has reached peaks that are often meaningless. But the market continued, pendularly, adapting to this condition. Unicorns were valued on the stock exchange in an apparently extra-reality way and now many of them are undergoing a review of their share prices. Down.
Startups and scale ups will continue to be valuable, because they will continue to be vital for the development of economies, which simply cannot stop.
We will see, as Alon says, more mergers from now on. And we will see, as quoted by Exame and I, companies remaining interested in the initiatives of entrepreneurs that have disruptive value and that can accelerate the machines of larger companies, which incidentally, just to remind you, without this fuel, simply stop innovating and growing.
No company is willing to pay the high price of obsolescence.