I’m getting asked every day how the volatility in the market is impacting us at NextView and impacting startup companies overall. I’ve struggled to give an answer I really feel good about, because the answer is that a) I don’t have a crystal ball that tells and future and b) how I feel about the market is different depending on who you are talking about in the startup ecosystem. Here’s how I’d break it down.

For early stage companies and for our new investment activity: I’m very bullish. When you start a company, or when we make a seed investment, we are thinking about the potential for the product and company over a long 10-year+ time horizon. The short term market has practical implications, but in general, I love investing in a weaker market because terms tend to be better, competition tends to be less fierce, and there is a general winnowing out of the market that occurs that simplifies everything.

The downside is that for founders, funding may be a bit more challenging and terms will be less aggressive. You also might want to raise a little more and be more conservative with the capital you do raise because it’s unclear exactly how long this negative sentiment will last. But on balance, I think you’d rather be a seed stage company building from the beginning in a softer market than in a really hot market.

For mid-stage companies, a weak market means that you are entering into a game of survival. The good news is that the negative market sentiment won’t last forever. Even in the last crisis, the stock market went from peak to trough in 18 months, and after that, things got better and better (even if it took a while for everyone to get their confidence back). Mid stage companies need to look at their burn rates and try to do whatever possible to extend runway, focus on proving really great PMF and solid unit economics, and try to survive until better days. Funding may be challenging, but it by no means has completely dried up. There is always a market for strong companies, but you just may take more dilution than you otherwise would if you raise capital, or you may raise less for the same dilution. That sucks, but realistically, if you are building a company with a 10-year time horizon, odds are this was going to happen at some point.

For late stage companies, I think that you are now going to come face to face with the decisions that you made over the past ~3 years of positive market momentum. Did you raise way too much money at too high of a valuation with downside protection for your most recent investors? Did you lose discipline around your spending or internal business practices? Were you chasing the right metrics and did you have the right priorities? Some decisions look very right assuming the markets keep charging along in your favor, but will look really bad as things turn the other direction. And the reality is that later stage companies have so much momentum, that it’s hard to make big changes without taking a lot of damage.

For investors, this market is a good test of confidence and fortitude. All investors know that you want to be aggressive when others are fearful, so now should be a great time to invest. But it ends up being easier said than done for a few reasons. First, investors are probably spending more time trying to help their portfolio companies deal with this market environment than they normally would in easier times. So their raw bandwidth for evaluating new investments is reduced. Second, psychologically, it’s hard to maintain confidence and optimism when you know that things are struggling within your portfolio of companies. Third, some funds are doing unnatural things to optimize their own fundraising, either by rushing to raise new funds as soon as possible while there is still capital, or some funds may try to extend their investment period and wait it out until better times. In either case, investors will be distracted or more conservative than they otherwise would be. The net result is that usually investors are more cautious and less active when markets are shaky, even though they all know that it pays to do the opposite.