In a rising market, prior round private valuations are marked up, VCs look like heros and raise more capital which leads to more rising valuations and more money for start-ups.

In a downturn, the opposite happens. Valuations drop, LPs stop throwing money at VC funds, VCs pull back & reserve cash for only the winners and fewer private raise money - with the rest hitting the wall. The current crop of start-up founders have never experienced this.

At the end of the day, the value of a business is the present value of its future cash flow. In a downturn only the businesses that can show a good return on capital will survive. Look out.

Kevin