VC funding gives us a taste of what’s to come.
So it hasn’t started yet, but the Fed is talking about not printing anymore money.
I know right. It’s for real. They’re saying that maybe they’re going to stop printing billions and billions of dollars every month.
Can you even imagine? Crazy.
So it means that the massive money printing experiment we’ve seen over the past two years might be coming to a close.
So what does that mean? Does that mean that everything starts going into reverse?
Well, not quite.
Because you can think about the Fed and the RBA sitting upstream, with asset markets sitting downstream from them, and you and I and your everyday punters sitting even further downstream from that.
Once the money starts flowing in, it can take several years to filter through the system.
Want proof of that? How about the massive amount of start-up funding Aussie companies have landed in the first quarter of the year? Fresh new Aussie businesses are finding that there’s mountains of money on offer to get their businesses off the ground.
According to figures put together by Chris Gillings’ from Cut Through Venture, Aussie companies landed a massive $3.6bn in venture funding in the first three months of the year.
That’s more money that the entire 12 months of 2020.
And it follows 2021 – a year that broke all records – with Aussie companies banking a colossal $10.1bn.
You can see how freakish 2021 was on this chart here:
This is the phenomenal tidal wave of money unleashed by the Fed and the RBA making its way down river.
And even though the folks at the top might be reining things back a bit, industry insiders reckon the money is still coming.
Mr Gillings says,
“There’s considerable local VC dry powder which needs deploying, and the international funds’ appetite for Australian start-ups appears to be holding up … I’d say we’ll see the number of deals done in Q2 stay steady or even rise slightly, but we’ll see valuations soften.”
EVP partner Justin Lipman also reckons there’s a huge amount of money already in the pipeline:
“It’s never been a better time to be a founder. The weight of dry powder – literally hundreds of billions of dollars – that had been raised globally is dollars that’s committed and has to be deployed under almost fixed term deployment schedules,”
Did you clock that bit about “fixed term deployment schedules”?
Do you see how it works? The Fed and the RBA print an absolute crap-tonne of cash, and that money enters the financial system.
Venture Capital (VC) firms are some of the first to access this cheap money, as the larger scale asset managers behind them start hunting for returns.
But they’re not allowed to just sit on that money. They’ve got to get out there and do something with it.
And so they go hunting for Aussie start ups. And based on the money coming in, they have a commitment to get that money going out over the next couple of years. That’s the “fixed term deployment schedule.”
And so the money continues to move down stream.
It’s coming and it’s massive.
The question now is, when does it hit property?