2023 has been “up up up” for tech stocks. Animal spirits have suddenly flipped from recession worries to “bull market”-like excitement.

Should founders rush out to raise now?

Public market context

The BVP Emerging Cloud Index (EMCLOUD) took a deep plunge in the past 18 months. From a peak of 18.5x ARR in September 2021, it fell to 5.2x in November 2022.

Since then, it has climbed to 6.9x – a 33% increase. That’s a big jump in just three months.

People have even started talking about IPOs again.

But is there trouble on the horizon?

Choppy waters ahead?

The US labour market has been exceptionally strong.

Non-farm payroll rose by more than half a million jobs in January. And the unemployment rate sank to its lowest level since 1969.

This could mean a soft landing and no recession. It could also mean renewed inflation pressure coming from wages.

It really could go either way from here.

Should founders raise now? Or wait?

Tech markets have been in a buoyant mood this year.

We’ve seen more activity in venture capital in January than we saw in most of Q4. Should founders who need capital raise now? Or wait and hope that multiples go up further?

It’s hard to time markets. If you need capital and can raise now, you probably should. Yes – ARR multiples might go up later this year. But funding markets might also freeze again.

And it’s worth considering:

• Raise now, potentially at a lower valuation, or
• Try later, but maybe not being able to raise at all?

Individual circumstances will apply. But on balance, if you need cash this year, and you have a reasonable offer now, you should probably take it.