For the last decade, venture capital investing has been operating in easy mode. Money poured evermore into tech startups as exit opportunities through IPOs or acquisitions seemed to abound no matter the business model, financials, or market conditions. Those days appear to be over.

As we enter 2024, VCs face a reality check to their high flying investments. The markets have turned, with tech stocks plummeting back to earth since early 2022. IPO volumes trail recent years. Even major tech companies like Meta and Amazon have announced major layoffs, signaling the end of unrestrained growth. Suddenly, exit planning seems far more complicated for many startups.

The extreme bull market conditions made it straightforward for even mediocre startups to exit through an IPO or acquisition. Investors essentially operated under the greater fool theory, assuming you could always find some buyer down the line even for startups with weak fundamentals. But that assumption no longer holds in today's more challenging environment.

Public market investors have lost their appetite for money losing consumer internet companies like Peloton, Beyond Meat, and Robinhood. Meanwhile, large tech giants facing their own financial struggles are less likely to splurge on high-priced acquisitions of unprofitable startups.

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The Cleanup Begins

As former unicorns like Lyft stumble in their public valuations, it signals weakening trust in these inflated private company valuations. VCs must now focus on backing startups with realistic paths to profitability since exit timing remains uncertain.

Industry experts expect a major correction in startup valuations in the coming year. In some cases, experts predict 50-75% mark downs of startup valuations from the pandemic peak. VCs will likely push to revalue existing portfolio companies in the months ahead to adjust to the new normal.

The easy money party appears to be ending. Of course, strong startups in essential tech sectors may still garner strong buyer interest. But for unproven consumer concepts expecting an easy path to liquidity, that plan needs major reassessment under current market conditions.

The era of guaranteed quick returns is over.