Global bond yields have spiked to generational highs, leaving investors worldwide bracing for market fallout and watching anxiously for what might crack or spiral under the pressure.
For anyone looking at early-stage deals, this macro shock hits close to home. When 'risk-free' government bonds offer yields not seen in a generation, the cost of capital across all asset classes explodes. Every backer—from an institutional fund to an individual putting in £500—now faces a much higher hurdle rate to justify locking up cash in illiquid, high-risk startup equity.
For founders, this reality demands a sharp adjustment in expectations. Higher baseline yields translate directly into steeper discount rates on future cash flows, pulling startup valuations back to earth and making capital far more expensive to raise.
The takeaway is simple: the era of cheap capital is over. Winning startups will be those that prioritize capital efficiency and realistic path-to-profitability models over growth-at-all-costs cash burns.