Sequoia’s Doug Leone says today’s downturn is worse than 2000 and 2008

Sequoia Capital Global Managing Partner Doug Leone speaks onstage during day two of TechCrunch Disrupt SF 2018 at the Moscone Center on September 6, 2018 in San Francisco, California.

Steve Jennings | Getty Images

HELSINKI, Finland — American venture capitalist Doug Leone doesn’t think the tech wreck is going away any time soon.

The Sequoia Capital partner gave a bleak outlook for the global economy, warning that today’s downturn is worse than the recessions of 2000 and 2008.

“Today’s situation, I think, is more difficult and challenging than 2008, which was really a sheltered financial services crisis, or 2000, which was a sheltered technology crisis,” Leone said on stage at the Slush startup conference in Helsinki.

“Here we have a global crisis. We have interest rates going up around the world, global consumers are running out of money, we have an energy crisis, and then we have all the problems of geopolitical challenges.”

Technology leaders and investors faced higher interest rates and deteriorating macroeconomic conditions.

As central banks hiked interest rates and reversed pandemic-era monetary easing, high-growth tech stocks are down.

The Nasdaq Composite is down nearly 30% year-to-date and is poised for a bigger drop than the Dow Jones Industrial Average, or S&P 500.

That had a domino effect on privately held companies, with companies like Stripe and Klarna seeing their valuations fall.

As a result, startup founders are warning their peers that it’s time to cut costs and get down to basics.

“The Best Lessons You Will Ever Learn”

“Think of what’s happened in the last two or three years: whatever you did was rewarded by an investor because of the abundance of capital,” Leone said.

“You were rewarded no matter what — you made a crappy decision, a crap decision, you got paid; you made a good decision, you got money – which is a lousy way for you to learn your craft. All of that is gone.”

“What you are about to learn are the best lessons you will ever learn, even in our business,” he added.

Leone said he doesn’t expect tech company valuations to recover until at least 2024.

“My prediction is that we won’t get away with it anytime soon,” said Leone. “If you go back to the ’70s, there was a 16-year malaise. Even if you go back to 2000, a number of public companies haven’t recovered for 10 years.”

He added, “I think we have to be ready for a longer period of time, where we’re going to find … consumers running out of money, demand falling, tech company budgets being cut.”

In private markets, seed-stage companies will be less affected than later-stage companies, which are more sensitive to movements in public markets, Leone said.

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