Why we’re still investing amongst the turmoil

Jon Lerner
Smedvig Capital
Published in
2 min readOct 14, 2022


We recently announced our investment in Lunio. So are we calling the bottom of the market if we’ve done 2 new deals in quick succession?

Smedvig Portfolio

No, we’re not. The tech market has seen a considerable correction in both the public and private markets caused by the rapidly changing macro-economic environment. However, there’s still plenty of space for a continued correction, especially if corporate earnings start to come under material pressure as a result of reduced consumer spending.

So why are we investing if the market may well continue to fall?

It’s incredibly difficult to call the bottom and ultimately at series A / B the micro dynamics of each deal have a material effect on pricing relative to the market. More importantly, finding phenomenal entrepreneurs and companies is never a given, so when we do find them, we have always tried to find a way to get a deal done provided that we can see attractive risk adjusted returns.

So, what’s the number one thing making us nervous?

I started talking about corporate earnings. Whilst most of our portfolio provide software that make corporates more efficient, in previous recessions we have seen slowing buying cycles, higher sign off required and top-down push from CFOs for no new PO’s. All of these make breaking into a green field market even more complex than usual and the impact of this is seen in slower growth, worsening CAC payback and potentially higher churn. For more mature businesses this can be painful. For younger business too small to cut to breakeven it can be fatal.

So, how has it changed out thinking on what we want to back?

As with any substantial macro shift, you have to adapt to the environment. For us, this means thinking about the following key points when looking to make new investments:

1. Ensuring businesses are very well capitalised relative to burn

2. Checking companies are not overly exposed to end markets that will be heavily impacted by any future reduction in discretionary spend

3. Making sure plans are appropriately cautious and can be adjusted on the fly to cope with further sales slowdowns

4. Doubling down on backing need to have, not nice to have. Always asking, is this solving a really big pain point?

5. Looking to back slightly more mature businesses than we might have before

We’re a glass half full. You have to be in venture! We hope we’ve seen the worst of it, but history (this is the 3rd major recession we’re seeing in the London market) tells us that it’s time well spent with our portfolio companies planning for how to sell into a recession and continuing to be optimistically cautious…



Jon Lerner
Smedvig Capital

Investor @Smedvigcapital, Angel and Mentor