Lay Low or Lean In? U.S. Venture and Recessions

David Coats
VC by the Numbers
Published in
4 min readSep 27, 2022

“U.S. Venture Activity Slowed More in Q2 as Economic Fears Rose” (VentureBeat 7/22). “The venture reset” (Crunchbase 6/22).

As the country appears to be heading into (or is already in) a recession, many VCs and LPs are pulling back on their investments into U.S. venture.

How have venture investments made during and following past economic downturns performed? We analyzed our industry-leading database of U.S. venture to find out, and to see if we could glean any learnings that would help us as a venture fund better navigate the current economic climate.

We analyzed investments made prior, during, and following the three most recent major recessions: the early 1990s’ Recession (7/90 to 3/91); the early 2000’s Recession (3/00 to 2/01), and The Great Recession (12/07 to 6/09). There was also a short COVID-19 Recession (2/20 to 4/20), but it is still too recent for us to gain meaningful insights regarding how investments made during this period will perform.

The graph below plots average total realized multiples for all U.S. venture investments made during each recession, as well as during the twelve months prior to and following each recession.

As illustrated, U.S. venture investments made during each of the major recessions since the early 1990’s have generated higher returns than the immediately preceding periods. Returns continued to increase further for investments made in the year following recessions.

Is there a difference by stage of investment? The graph below plots the percent change in invested dollars and returns during these recessions, when compared with the prior twelve months, by investment stage.

During recessions, investors pull back investments and returns increase across all investment stages. However, the pullback is most severe and the increase in returns most significant in early stage rounds (Seed and Series A) versus later stage rounds.

The graph below plots similar data but by major industry group.

Consistent with the conventional wisdom that the success of healthcare investments tends to be independent from economic climate, we see no difference on average for returns for healthcare investments made during versus preceding recessions.

Historically, recessions have typically preceded longer more attractive periods for deploying capital in U.S. venture. The graph below plots mean realized gross multiple for all U.S. venture investments by each financing year since 1988. We didn’t plot the data for investments made after 2016 because there is a significant lag in venture outcomes and there are not yet enough realized outcomes to draw meaningful conclusions on ultimate returns. The recessions are labeled with the red arrows. As you can see, invested dollars declined and returns increased during and following each of the most recent recessions.

While there can of course be no assurances that the trends above will repeat in the current economic climate, one general conclusion we’ve observed from analyzing many different relationships in U.S. venture is that history tends to repeat itself. We at Correlation Ventures are actively making new venture investments. We are leaning in versus laying low.


If you are entrepreneur raising or working with a team that is closing a round, we would value any introductions where we might be helpful as a co-investor.

Correlation Ventures is the predictive analytics pioneer in the venture capital industry and the industry’s leading co-investor. With more than $475 million under management, we’re one of the most active U.S. venture investors. Since inception, we’ve invested in nearly 400 companies. Sample portfolio companies include: AlienVault (ACQ:AT&T), Astra (ASTR), BlueVine Capital, Gabi (ACQ: Experian), IonQ (IONQ), Imperfect Foods, Janux (JANX), Lemonaid (ACQ: 23andMe), Lever, Manticore Games, Personal Capital (ACQ: Empower), PowerVision (ACQ: Alcon), Synthorx (ACQ: Sanofi), and Upstart (UPST). Correlation offers a dramatically better option for lead investors, syndicates, and companies seeking additional venture capital to fill out a round. We offer the most rapid, low hassle, and helpful source of co‐investment capital in the industry; for example, typically making investment decisions within days. Correlation is backed by leading institutional investors.

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