The VC Advantage: Investing Upstream of Market Noise

In my decades of investing, I’ve observed a fundamental truth: the best investments often require patience. While public markets swing wildly with headlines and quarterly reports, venture capital follows a different rhythm — one that rewards those willing to look beyond temporary market conditions.

It’s never a bad time to make long-term investments in innovation. That may sound counterintuitive, especially when markets are plunging, but history tells us that economic downturns often spark the most transformative companies of our time.

Innovation Doesn’t Check the Weather

Founders don’t consult economic forecasts before launching world-changing companies. They start ventures because they see problems that need solving, regardless of market conditions.

I remember the aftermath of the 2008 financial crisis vividly. While many investors retreated to safety, something remarkable was happening. From that period of economic darkness emerged Uber, Airbnb, Moderna and WhatsApp — companies that would go on to transform entire industries and create billions in value.

This pattern repeats throughout history. Sometimes, even the wreckage is accretive to overall sector growth, like a forest fire. The dot-com crash of 2000 cleared away speculative excess and created space for a new generation of resilient companies. During that period, companies like LinkedIn (2002) and SpaceX (2002) emerged directly from the ashes of the bust. Some companies founded just before the crash, like Salesforce (1999), weathered the storm and established new foundations for enterprise software. This doesn’t minimize the pain along the way, but for diversified, disciplined portfolios it can bring growth from disruption.

Even the Black Monday crash of 1987 didn’t halt innovation. Beginning my career at TA Associates in the early 1990s, I watched as companies founded during that turbulent period like Cisco Systems (founded in 1984, IPO’ed in 1990) continued building. Other innovators like Qualcomm and Starbucks were early in their journeys during this crisis yet persevered to become industry giants.

Venture Capital’s Structural Advantage

The chart reminds us of a critical insight: venture investment cycles follow their own patterns, often independent of broader market movements and are ultimately determined not just by exit valuations, but also by the power tension between startups and investors at the point of capital deployment.

This reflects venture capital’s structural advantage: we operate upstream of public market volatility. While investors in public companies react to quarterly earnings and daily news, venture capitalists focus on fundamental innovation and value creation measured in years, not quarters.

At Alumni Ventures, we believe significant economic value will be created over the next 5-10 years, regardless of near-term market conditions. Technology sits upstream of everything happening in our world — from healthcare advances to energy transformation. By positioning yourself at this source, you gain special exposure to value creation that others can only access after much of the growth has already occurred.

The Disciplined Approach in Practice

Venture investing requires both patience and discipline. When markets fluctuate, many investors abandon their long-term strategies, falling prey to fear or Fear Of Missing Out (“FOMO”). Strategic venture investors instead maintain consistent approaches regardless of market sentiment.

This means making regular allocations to venture capital across market cycles, building diversified portfolios that can capture outlier returns. At Alumni Ventures, we emphasize this disciplined approach — investing in several dozen companies per fund and encouraging our investors to build substantial startup portfolios over time. The power law distribution of venture returns means a single exceptional investment can deliver outsize returns that more than compensate for underperformers.

Disruption Thrives in Volatility

During economic downturns, startup valuations typically become more reasonable, talent becomes more available, and entrepreneurs must focus on efficiency rather than growth at all costs. Companies born during these periods tend to develop resilience and capital efficiency that serve them well throughout their lifecycle.

This diversification becomes particularly valuable during periods of market stress. When public equities experience volatility, private venture investments may continue progressing toward value-creating milestones independent of market sentiment. Their valuations, determined by discrete funding rounds rather than daily trading, remain stable for extended periods, insulating them from short-term volatility. Alumni Ventures deliberately invests alongside experienced, well-established lead investors. The result is that our portfolio companies benefit from deep and sustained capital pools, even through darker economic periods.

Embracing the Long View

In our world of instant gratification and 24/7 financial news, maintaining a long-term perspective has become increasingly rare — and increasingly valuable. Venture capital enforces this long-term thinking through its structure, with typical fund lifespans of 10+ years and portfolio companies that may take years to reach liquidity events.

This extended time horizon isn’t a limitation but a feature. It allows investors to participate in the full value-creation journey of breakthrough companies. While public market investors might jump in and out of positions based on quarterly results, venture investors can remain steadfast partners to visionary founders building the future.

At Alumni Ventures, we believe that positioning yourself at the source of innovation provides strategic stability during uncertain times. Our approach protects and builds wealth by maintaining disciplined exposure to the upstream forces shaping our economy.

History has shown repeatedly that periods of economic difficulty often become crucibles for extraordinary innovation. For patient venture investors willing to take the long view, market volatility isn’t something to fear — it’s an opportunity to position yourself for the next wave of transformative growth.

This communication includes forward-looking statements, generally consisting of any statement pertaining to any issue other than historical fact, including without limitation predictions, financial projections, the anticipated results of the execution of any plan or strategy, the expectation or belief of the speaker, or other events or circumstances to exist in the future. Forward looking statements are not representations of actual fact, depend on certain assumptions that may not be realized, and are not guaranteed to occur. Any forward-looking statements included in this communication speak only as of the date of the communication. AV and its affiliates disclaim any obligation to update, amend, or alter such forward-looking statements whether due to subsequent events, new information, or otherwise. While the information herein is collected and compiled with care, to the extent such information was obtained from portfolio company management and/or other third party sources, neither AV nor any of its affiliated companies warrants or guarantees the accuracy or the completeness of such information.”

Venture capital investing involves substantial risk, including risk of loss of all capital invested. Achievement of any investment objective, including any result or outcome referenced in this presentation, cannot be guaranteed. Diversification cannot ensure a profit or protect against loss in a declining market. It is a strategy used to help mitigate risk. Any investment performance or outcomes discussed with you is provided for illustrative purposes only. Except where expressly noted, no representation is intended that any investment outcome shown or discussed is, or would be, representative of results obtained by any fund or investor associated with AV. Any investment you may make in any fund affiliated with AV will likely make different investments from any examples shown in this presentation, and the outcomes from those investments may differ materially from any example outcomes shown or discussed. Past performance does not guarantee future results.