Atman Monthly Update — The Second Stage of the Correction — April 2023

Atman Capital
3 min readApr 12, 2023


With the year's first quarter behind us, we are navigating the second phase of the correction process regarding the cost of capital, valuations, and exit expectations for the 2019–2023 startup vintages. While we may still have some way to go, we see positive signs of stability and resilience in the market as we go through a flight to quality on the LP and GP sides.

The fall of SVB brought additional noise to the market, but the federal government’s swift action helped bring stability back. While there are still gaps in the market, particularly on the venture debt side and international banking for VC-backed companies, these gaps will be filled in due course.

The most concerning aspect for the years to come are three-fold i) the currently unattainable IPO market, ii) the requirements for seed companies to graduate to subsequent rounds of financing, and iii) the value of M&A exits in the coming quarters.

The tough environment for exits is causing a liquidity crunch as investors wait for signals of the bottom. To provide a more crystalized perspective, in Q1, there was only $5.8B in closed exit value for venture-backed companies, representing less than 1% of all exits that happened in 2021.

Irrespective of the dry powder available, venture capitalists are in capital preservation mode. The average NTM multiples are stabilizing at 6x when looking at the 84 leading high-performance listed SaaS companies. With 1800 unicorns globally, over 200 companies are waiting for an IPO.

According to our conversations with all leading investment banks, the expectation is that the window will only re-open in 2024 or during the first half of 2025.

There won’t be enough oxygen masks for all startups that raised rounds in the last three years, and investors must choose accordingly.

Every week, we observe valuation corrections at all levels and a shift in bargaining power toward investors. The norm for all companies under an insecure outlook of the next 24 months is to find a path to sustainable growth and prioritize profitability versus blitzscaling. With the current financial constraints, all high-quality founders are focused on fundamentals early on.

Clearing the system will take time, as private markets take at least six months to digest new valuations. If 2022 was marked as a record year of fundraising mega-funds, in Q1 2023, only US$11.7B was raised for new funds, the lowest number since 2017.

More noticeable was that the Nasdaq 100 (QQQ) gained 21% in Q1, with breakout gains coming from the three worse performers of last year, respectively. NVDA (+90%), META (+76%), and TSLA (+68%). Furthermore, the FED raised interest rates to 5%, indicating that the rate raise cycle might end.

Through it all, several founders remain focused on building legendary companies; our job is to find and partner with them. Deals are still happening, but rounds are smaller, focused on milestones, or highly structured to protect investors from potential downsides.

The global market has returned to pre-COVID levels when we look at the total number of venture deals across stages in Q4, totaling US$65.9B across 7,241 deals, the lowest number since Q4 2020.

Fortunately, since our fund is a new vintage, we have no exposure to the noise of the last three years.

As we begin the second stage of the correction, where margins matter, giving away money to customers is not a strategy for client acquisition. Top-line growth isn’t a substitute for bottom-line endurance.

The best ones already took the hard medicine for what will come.

We have been fortunate to have increased our AUM during such challenging times and are grateful for our LPs’ trust in our ability to identify alpha amid the correction we face.

Inevitable founders know what to do, and we will continue to partner with them.