We are in very<\/span> interesting times today. It\u2019s rare to see so many tectonic shifts happening in real time: High interest rates, declining equity values, SVB and other banks failing with a continued contagion risk and a recession looming.<\/p>\n

There has been an aggressive shift in assumed equity returns compared to fixed income returns. The data tells a clear and extreme story.<\/p>\n

Simply put, equity risk premiums (ERPs) have broken down well below the ranges that were established since 2008. The ERP calculates the projected S&P returns versus the returns of 10-year treasury bills (data from Morgan Stanley).<\/p>\n

The below chart is important to the startup audience because it speaks to why fundraising is extremely challenging right now and why valuations are coming down so dramatically. Opportunity cost is powerful indeed.<\/p>\n

For the venture world specifically, this dynamic is compounded by the venture debt markets cooling, which in turn makes equity the most viable option for most.<\/p>\n