Sequoia Capital Global Managing Partner Doug Lyon speaks on stage during Day 2 of TechCrunch Disrupt SF 2018 at Moscone Center on September 6, 2018 in San Francisco, California.
Steve Jennings | Getty Images
Helsinki, Finland — American venture capitalist Doug Lyon doesn’t think the tech wreck will vanish anytime soon.
Partner Sequoia Capital gave a grim view of the global economy, warning that today’s downturn was worse than the recession of 2000 and 2008.
“I think the situation today is more difficult and more challenging than in 2008, which was really a sheltered financial services crisis, or 2000, which was a sheltered technology crisis,” said Leon, speaking onstage at the Slush startup conference in Helsinki.
“Here, we have a global crisis. We have interest rates around the world that are increasing, consumers globally are running out of money, we have an energy crisis, and then we have all the issues of geopolitical challenges.”
Technology leaders and investors have had to reckon with higher interest rates and worsening macroeconomic conditions.
With central banks raising interest rates and reversing pandemic-era monetary easing, high-growth tech stocks have been on the decline.
The Nasdaq Composite is down nearly 30% since the start of the year, and is facing a steeper decline than that of the Dow Jones Industrial Average or the S&P 500.
This had a huge impact on private companies, as the likes of Stripe and Klarna saw their valuations drop.
As a result, startup founders are warning their peers that it’s time to rein in costs and focus on the essentials.
“The best lessons you’ll ever learn”
“Think about what happened in the last two or three years: Whatever you’ve done will be rewarded by some investors with plenty of capital,” Leon said.
“You’re rewarded no matter what – you made a small decision, a bad decision, you got the money; you made a good decision, you got the money – a lousy way to learn your craft. It’s all gone.”
He added, “What you will learn now are the best lessons you will ever learn, even in our business.”
Lyon said he doesn’t expect the tech companies’ valuations to recover until at least 2024.
“My expectation is that we’re not going to get out of this very quickly,” Lyon said. “If you go back in the 1970s, there was a 16-year malaise. Even if you go back to 2000, a number of public companies haven’t recovered for 10 years.”
He added, “I think we have to be prepared for a prolonged period where we will find… consumers run out of money, demand diminishes, and tech companies’ budgets are slashed.”
Lyon said that in private markets, seed-stage companies will be less affected than late-stage companies, which are more sensitive to movements in public markets.