Herd mentality and FOMO: The issues facing the venture capital industry right now

In his latest blog for Finextra our Venture Partner Pierre F. Suhrcke explores the forces that drove a record year for global venture capital in 2021 that saw funding up 111% year-on-year and total value hitting $621 billion. But as Pierre explains, the brakes are now on and hard!

“To understand what happened, we must look at what drove the hype in 2021.Put simply, fear of missing out among investors, of the venture capital industry, sparked a veritable gold rush. They saw their peers investing (this per se didn’t create FOMO) , and it created a herd mentality. As more people invest, more people feared losing out, so they help propel the bandwagon along as more people jump on.

In particular, the investor focus was on buy-now-pay-later (BNPL), Amazon shop aggregation, and last-mile delivery. Companies in those sectors were the big winners when it came to massive (and fast) funding deals and unprecedented valuations. Multi-billion-dollar investments were closed in weeks, with valuations topping 100x projected revenues.”

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Source: Finextra