𝗧𝗵𝗲 𝗲𝗻𝗱 𝗼𝗳 𝗩𝗖 𝗮𝘀 𝘄𝗲 𝗸𝗻𝗼𝘄 𝗶𝘁?

But from a niche industry populated by specialist investors generating above average returns, it has now morphed into an industry where 𝗮𝗹𝗹 𝘀𝗼𝗿𝘁𝘀 𝗼𝗳 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝗮𝗿𝗲 𝗰𝗵𝗮𝘀𝗶𝗻𝗴 𝘁𝗵𝗼𝘀𝗲 𝗩𝗖 𝗿𝗲𝘁𝘂𝗿𝗻𝘀. This can only end up in tears.

We can point to a variety of 𝘄𝗮𝗿𝗻𝗶𝗻𝗴 𝘀𝗶𝗴𝗻𝗮𝗹𝘀:

👉 𝗧𝗵𝗲 𝗔𝗜 𝗰𝗿𝗮𝘇𝗲 𝗶𝘀 𝘂𝗽𝗲𝗻𝗱𝗶𝗻𝗴 𝗰𝗹𝗲𝗮𝗿 𝘁𝗵𝗶𝗻𝗸𝗶𝗻𝗴 – It reminds me of the “New Economy” (c. 1999) at the time of the internet. The fact that 2/3 of the investment goes into AI is clearly overdone. Ditto for companies which are unicorns from the get-go. And the combination of the two is spelling trouble, with nearly 2/3 of venture investment in 2026 YTD going into deals of more than $1bn (the chart below).

👉 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻𝘀 𝗮𝗿𝗲 𝗴𝗲𝘁𝘁𝗶𝗻𝗴 𝘀𝗶𝗹𝗹𝘆 – Valuations are mainly comparables-based, i.e. previous valuations are baked into the next ones, until the markets realize this is unsustainable. Will SpaceX (which has now dipped against its IPO price) be the moment when markets turn? Will Helsing’s valuation (higher than Anduril on a revenue multiple basis) be the straw that breaks the camel’s back?

👉 𝗦𝗣𝗔𝗖𝘀 𝗮𝗿𝗲 𝗮 𝗱𝗶𝘀𝗮𝘀𝘁𝗲𝗿 𝘄𝗮𝗶𝘁𝗶𝗻𝗴 𝘁𝗼 𝗵𝗮𝗽𝗽𝗲𝗻 – The 2021 SPAC lessons are pretty clear: public investors only support companies which are revenue generating, with a clear path to profitability. Whereas SPACs should be a useful tool to bring experienced management talent into younger companies, they are instead used as a last resort financing tool.

In all this, investors (and their LPs) are getting mixed up:

➡️ 𝗩𝗲𝗻𝘁𝘂𝗿𝗲 𝘃𝘀. 𝗠𝗼𝗺𝗲𝗻𝘁𝘂𝗺 𝗶𝗻𝘃𝗲𝘀𝘁𝗶𝗻𝗴 – Many investors nowadays rely on finding new investors willing to pay more, i.e. momentum. Venture investing is about helping a company’s innovation find its market fit. Hype markets are kind to momentum investors; it doesn’t mean these investors are building value sustainable during a market downturn.

➡️ 𝗟𝗮𝗿𝗴𝗲 𝗩𝗖 𝘃𝘀 𝗚𝗿𝗼𝘄𝘁𝗵 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 – Large investors are welcome, in particular in Europe where investors have historically starved companies for money. The real question is whether these investors finance companies which are already over the hump (mini-PE), or whether large investments are also available for companies which low or even pre-revenues (which admittedly is what European deeptech needs).

📎 Sources
>https://www.economist.com/business/2026/07/06/beware-the-top-heavy-economy
‍>https://www.bbc.co.uk/news/articles/c3wyj6e4210o
‍>https://www.ft.com/content/958e8dd4-52b1-425b-9e05-5d20bde416f8?syn-25a6b1a6=1

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