VC firm warns that funding pullbacks are ‘not a blip’

The prospect of the tech bubble bursting is like Silicon Valley’s version of an asteroid heading to Earth: as more people begin to see it and recognize it’s there, the thoughts turn to how long we have left and how much damage will be done.

Fortune spotted a published quarterly letter to limited partners penned by First Round Capital — a prominent VC firm in the area that has funded many successful companies including billion-dollar ‘unicorns’ Blue Apron and Warby Parker. In it, the company takes a stronger stance on what it believes to be the “old normal” for VC funding of tech companies.

It’s also… admittedly slightly more pessimistic than the letter they sent out last year regarding the same topic:

There is an entire generation of founders (and funders) who have only experienced one kind of market –the boomtime market of the last eight years. They have never experienced a downturn, and many believe that this is just a temporary blip. Some even believe that the venture capitalists who are blogging and tweeting about the market downturn are doing so in a deliberate attempt to drive valuations down (disregarding, of course, the impact that lower prices will have on that VC’s existing portfolio). We have been working aggressively to help coach our founders on the realities (and consequences) of market cycles.

So what is First Round preparing for? The stock price of tech companies like Twitter are experiencing major dips and “corrections” in value, and the firm is confident that it’s not just a fluke. Where money and opportunity once flowed with bigger opportunities to shoot for the moon, there are more risks involved. As a result, there’s a feeling that indicates less money will be available for new venture capital rounds.

While the letter doesn’t directly call the situation a “bubble” it acknowledges it’s not a “temporary blip.” Rather, the public market is pressuring companies to provide unit economics on top of growth — particularly, get this, profitability — in order to increase value.

The act of VC belt-tightening is another sign to industry soothsayers that it won’t be long before a real downturn strikes the tech world.  Is it only a matter of time?

➤ First Round Capital [via Fortune]