Market & Business
Tech Winter
A prolonged downturn in venture funding, startup valuations, and tech hiring — characterized by layoffs, down rounds, and reduced VC activity.
Tech winters follow the boom periods that precede them. The 2022-2023 tech winter followed the unprecedented funding environment of 2021. Characteristics included: median Series A valuations falling 40-60% from peak, layoffs at companies that had over-hired, micro-VC funds unable to raise new funds, and IPO markets essentially closed.
Tech winters differ from ordinary economic downturns in that they primarily affect the private market ecosystem — not necessarily the underlying technology adoption, which can continue growing even as investment contracts.
In Practice
2022-2023: Sequoia released its 'R.I.P. Good Times' memo (echoing the 2008 version). YC sent a memo to portfolio companies to 'plan for the worst.' Klarna raised at an 85% valuation cut. Hundreds of well-known startups shut down or sold for less than their last round.
Why It Matters
Tech winters reveal which companies have real business models versus which relied on cheap capital to paper over bad unit economics. Companies that survive winters by cutting to sustainable growth emerge stronger with less competition.
VC Beast Take
Every tech winter ends — and they tend to create the conditions for the next boom. The companies that did the hard work of finding real product-market fit and cutting to profitability during 2022-2023 were well positioned when AI-driven enthusiasm reopened markets in 2024.