Adapting to Endure
Sequoia Capital · 2022
"The era of free capital is over; founders must pivot to profitability as rates rise and multiples compress."
In 2022, as tech stocks crashed and interest rates spiked, Sequoia released a sequel to RIP Good Times called 'Adapting to Endure'. The core message: the era of 'growth at all costs' fueled by zero interest rates was over, and free cash flow was king again.
The presentation dissected the shift in valuation multiples. During the ZIRP (Zero Interest Rate Policy) era, investors valued companies on forward revenue multiples, allowing startups to burn massive amounts of cash to acquire users. As rates rose, the cost of capital increased, and the market violently rotated back to valuing companies based on actual earnings and free cash flow margins. Startups were told to immediately cut unproven projects and focus on high-ROI core businesses.
What fundamental shift in investor behavior did 'Adapting to Endure' highlight?
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- Adapting to Endure (Sequoia Capital, 2022)Sequoia Capital
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