Who Wants a Market Downturn? These Investors Actually Do.

But the rising valuations have only continued to climb in the last year. In 2018, the median company valuation for one category of mature start-ups more than doubled to $420 million, up from $183 million in 2017, according to Carta, a provider of valuation software and services. And in a 2017 National Bureau of Economic Research study of 135 unicorn start-ups, researchers concluded the companies were overvalued by an average of 50 percent.

“There’s too much heat around good, not necessarily great, companies” that are older, said Mamoon Hamid, a partner at the venture firm Kleiner Perkins. Even one “good, not great” company he recently met with had 13 investment offers, he said. The upshot: Kleiner did not invest.

Greg Sands, a managing partner at Costanoa Ventures, said his venture firm walked away from three investments in 2018 where the price was 30 percent higher than he was willing to pay, an increase from past years. He also screened out numerous companies that were asking for more money than seemed reasonable — yet some of those companies then went on to raise triple that amount from other investors.

“What’s happening right now isn’t sustainable and it won’t go on forever. It can’t,” he said. Costanoa raised a $75 million “opportunity fund,”, which Mr. Sands said would give it the ability to do more deals when the market cools down.

Many other venture capital firms are also in a position to become more aggressive in case of a market downturn. Venture funds raised $30.2 billion in the first three quarters of last year, on track to surpass 2017’s total of $35.3 billion, according to PitchBook, a data provider.

Start-up founders also appear to be preparing for a potential shift in fortunes. In a survey conducted late last year by First Round Capital, a venture capital firm, just under half of 529 entrepreneurs said they expected fund-raising to become more difficult in 2019. A third said they believed the tech bubble was close to popping, a 10-point increase over 2017.

Some start-ups are raising more money to weather the uncertainty, according to Kirsten Green, a managing partner at Forerunner Ventures. Others are creating backup plans to cut costs so their survival won’t depend on new funding.