Can the boom times last?

Hi, it’s Sarah McBride. Some VCs think the current boom is headed for a correction. But first… Today’s top tech news: Oracle will buy medica [View in browser]( [Bloomberg]( Hi, it’s Sarah McBride. Some VCs think the current boom is headed for a correction. But first… Today’s top tech news: - Oracle will buy medical records company Cerner [for $28.3 billion]( - Elon Musk says he’ll pay [$11 billion in taxes]( this year after exercising millions in stock options - Bitcoin extended its [five-week slump]( How long will the good times roll? Last week, venture capitalist David Sacks issued a stark warning for startups. “I think we could be in for a correction or downturn or bear market that we haven't seen in a while,” [he said]( at the Bloomberg Technology Summit. “I think founders need to be aware of that.” Startups should take advantage of the current boom, he advised. “If you have a term sheet outstanding I would close that money very quickly.” Later in the day, investor Garry Tan also gave pointers for a slowdown. “If you could have a large war chest going into a recession, and then that allows you to build your product, your startup, your go-to-market a thousand times better,” said the Initialized Capital co-founder. “Those hard times are actually the moments when the next Airbnb is born.” For younger entrepreneurs and VCs who have known nothing other than the past decade’s boom, the warnings might not resonate. After all, through Nov. 30, U.S. venture funds raised $119 billion—well over the $87 billion raised all of last year, according to PitchBook. For the first time, the number exceeds the $100 billion raised in 2000 (Thomson Reuters tallied the earlier figures, meaning the numbers may not be exactly comparable to today’s). This year, investors have been spending freely to match, deploying $305 billion into startups through Nov. 30. That compares to $167 billion for all of 2020, and has led to some sky-high valuations, including at companies that had raised money only a few months earlier. In October, for example, Israeli online security company Wiz [tripled its valuation]( to $6 billion after a round valued it at $1.7 billion earlier in April. Last month, wholesale retail site Faire said a funding round valued it at [$12.4 billion](, up from $7 billion in June. In the public markets, though, the valuations of technology companies have fallen in recent weeks. Now, as late-stage investors compare private and public market companies in the same field, private companies can look expensive. That’s happened a few times over the past decade, said Jack Abraham, managing partner at Atomic. And the reset of expectation over what comprises a fair valuation can happen very quickly. “It affects everyone,” he says of the pricing caution that seeps through private markets. “The earlier stages will feel it less. It doesn’t mean they’re going to be immune.” The previous record funding year was 2000. That boom, of course, gave way to a period of a few dark years where startup investing fell so much that some venture firms—including Accel Partners, Mohr Davidow Ventures and Redpoint Capital—ended up returning capital to their investors. Today’s environment looks very different compared with those times, when many venture firms had invested heavily in dot-com businesses with no path to profitability. “If I was to compare and contrast at the most fundamental level, the real issue that was going on back then was an existential crisis about the viability of those businesses,” said Roger Lee, a general partner at Battery Ventures. “Fast forward to today, and none of those questions exist.” The group of startups maturing today are typically larger and stronger, and in many cases based on business models that barely existed 20 years ago, such as digital advertising or cloud computing. “There’s enormous runway as the world becomes more digital and driven by software,” Lee said. On top of the fundamental strengths of the startups—the carrot—backers of venture funds, known as limited partners, also must contend with a stick. They have fewer alternative investment options, given choppy public markets and rising interest rates. “Capital has to go somewhere,” said Abraham. It’s a good time to be a startup, at least for now. —[Sarah McBride](mailto:smcbride24@bloomberg.net) If you read one thing Americans who bought drones from Shenzhen-based DJI Technology are increasingly being viewed by the U.S. as [unwitting tools of Chinese spies](. Here’s what you need to know China ordered Amazon to delete reviews of Xi Jinping’s book [according to reports](. Zepto, an Indian grocery startup founded by teens, is now [worth $570 million](. As the jury deliberates Elizabeth Holmes’s fate, [here’s a recap]( of the of the more-than-three-month trial. Follow Us More from Bloomberg Dig gadgets or video games? [Sign up for Power On]( to get Apple scoops, consumer tech news and more in your inbox on Sundays. [Sign up for Game On]( to go deep inside the video game business, delivered on Fridays. Why not try both? 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