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Pandemic Uncertainty
The emergence of the COVID pandemic created massive uncertainty throughout the economy. Innovation based startups typically have short capital runways. Uncertainty introduces new risks these companies will run out capital before they can generate meaningful revenue. While the medical uncertainty of COVID is waning the political uncertainty continues unabated.
Acceleration of trends
It's great when trends are accelerating in your direction, but can be devastating when they are heading the other way. Some trends accelerated by the pandemic seem likely to persist, while others may diminish or disappear. Trying to make that call introduces a new dimension making early stage investments all the riskier.
FreE Market Distortions
Research by the Angel Capital Association supports that the majority of return on an angel portfolio comes from well less than 1/3 of the companies. Government and central bank responses to the COVID pandemic have flooded the world with capital. We have dramatic impacts on asset class valuations probably more tied to excess liquidity than underlying value. Cash is chasing returns and valuations of innovation based companies is increasing through all stages. A successful seed/angel portfolio typically needs one or more exits at 10-30 times the valuation at investment. As higher valuations are realized at seed/angel stages achieving a 10-30x exit becomes more and more remote.
Political Rhetoric
Rhetoric introduces uncertainty while action may be even worse. Proposals to tax unrealized gains at death, or even annually, make owning illiquid difficult to value assets untenable. The reemergence of the concept of taxing "Windfall Profits" in hydrocarbons raises flags about how high return exits may be treated in the future.