How Big is the Bubble?

The start of a new year is typically a hopeful time, complete with resolutions for new habits and new agendas. This year’s bright future has been somewhat dimmed by Omicron’s rampant presence, infecting the hopeful New Year vibe with isolation and canceled plans. Gyms are typically receiving their biggest influx of new guests during this time, but this highly transmutable variant might ice those plans for many. Those planning to escape the winter blues might be hard-pressed to find a flight, with cancellations due to staffing shortages continuing.

Despite our reluctance to enter yet another year with COVID still raging, one area seemingly unaffected is the early-stage investment landscape. This past year, 2021 proved to be a booming year for valuations in novice startups, with greater competition among seed-stage deals, and there’s little sign of it slowing down. Enormous returns for private market investors in companies like Robinhood and Doordash -- as well as a rapidly evolving tech landscape sped up by the pandemic’s push for a more digital world (think food-delivery and mobile payments) -- are adding to the hype around early investments.

Some investors describe the dizzying heights of returns and valuations of early companies as surreal and possibly irrational. A Wall Street Journal article on the subject points out the example of Blank Street, a coffee company that has raised three rounds of funding since its founding in 2020 for its business proposition of no-frills coffee shops in Manhattan.

Some companies that saw exceptional growth on the public ticker during the pandemic have since had plummeting returns–a reminder that exponential growth has a great distance to fall. Peloton and Zoom have both taken nosedives since their early pandemic icon statuses.

To see what happens to these outsize investments in 2022, stick around the Daily Stack.