Macroeconomic Update: I remain significantly more bearish than consensus!

Of late recessionary talk has cooled off. Jerome Powell and the Fed are no longer expecting a recession. The consensus is for the US to have a soft-landing allowing core inflation to go back down to 2% by 2025 while avoiding a downturn. While I hope for this outcome to happen, I find it unlikely as this feat was technically only achieved once in the last 60 years in 1993-1994.

Many areas give me cause for concern.

1. Commercial real estate is headed for a major crisis.

Commercial real estate is typically financed in tranches. There is a 30-year amortization but financed in 10-year increments. When you buy the building, you finance it in such a way that you pay down 1/3 in the first decade with a balloon payment for the remaining 2/3s due at the end of the decade. You then refinance this 2/3s, paying down another 1/3 over another 10 years. You do it again a decade later.

When the big balloon payments come due, if occupation is low while interest rates are high (today’s conditions), the economics may no longer work. Why refinance at high rates for a low yielding asset. Investors risk walking away, handing the assets over to the bank.

With $1 trillion of commercial real estate loans coming due by the end of 2024, there is a major crisis headed our way. While anecdotal, FJ Labs’ building default and take over by the bank seems an augur of things to come.

2. The commercial real estate crisis will exacerbate the banking crisis.

The commercial real estate crisis is going to saddle banks with low yielding assets. This is happening while bank deposits are continuing to contract at an unprecedented rate as depositors seek higher yields in safer assets such as treasury bills which will continue to depress commercial lending.

3. The U.S. Consumer is in dire straits.

All debt balances are at a record high:

  • Household Debt: $17.1 trillion
  • Mortgage Debt: $12.0 trillion
  • Auto Loans: $1.6 trillion
  • Credit Card Debt: $1.0 trillion
  • Student Loan Debt:  $1.6 trillion

Interest rates are higher than they’ve been in 15 years:

  • Credit Card Debt: 25%
  • New Car Loans: 14%
  • Used Car Loans: 9%
  • 30Y Mortgage: 7.5%

a. Credit Card balances are at 20-year highs while credit card interest rates are skyrocketing.

While the overall debt level is reported in nominal numbers which paints a slight worse picture than reality, the situation seems dire:

  • The number of Americans rolling credit card debt from month-to-month is now higher than the number of people paying their bills in full for the first time ever.
  • The default rate on credit card loans from small lenders is now higher than during the dot com bubble, financial crisis, and Covid-19.

b. 70% of Gen Z & Millennials are now living paycheck-to-paycheck and over 50% are still somewhat or very financially dependent on their parents.

4. Corporate debt refinancings will be expensive and difficult.

Between $500 and $850 billion of corporate debt needs to be refinanced every year by Fortune 500 companies during the next 5 years at significantly higher rates than in the past 15 years.

5. The Purchasing Managers Index (PMI) is contracting globally and nearing pre-recessionary levels where PMI drops below 50.

The direction of economic trends in the manufacturing and services sector is negative. This is happening simultaneously in all major economies.

In the US we are at 46.4. 79% of the times the PMI went below 47, we ended up in a recession.

6. The yield curve is deeply inverted.

It’s rare for ten-year treasury rates to be lower than the 3-month treasury rates. The yield curve inverted before every recession that started in the last 70 years except in 1966. It’s currently more deeply inverted than it’s been since 1982.

7. People are finally coming to terms with the fact that rates will be higher for longer.

In early 2022 when people were still underwriting terminal rates of 3.6%, I argued that rates were likely going to top 5% and stay higher for much longer than people suspected in order to tame inflation. Between the last two FOMC meetings I’ve seen a drastic shift in market expectations. Markets were expecting a full 1% rate cut by next year and are now expecting half that. The new median feds fund rate projection is for 5.1% in 2024 and 3.9% in 2025. Given the higher discount rate, many fewer projects are being greenlit.

8. Political and geopolitical turmoil is not abating.

The political environment is exacerbating economic uncertainty. A US government shut down looks likely in November with continued turmoil over the 2024 elections. Russia and Ukraine are in a war of attrition with the quagmire likely lasting years keeping energy and food prices high for years to come.


I realize that pessimists sound smarter than optimists, but with so many indicators flashing red I find it extremely unlikely that we will have a soft landing. A recession seems like the far more likely scenario and as such we should brace ourselves for a difficult 12 months.

While in the short term the macro trumps the micro with markets not differentiating good companies from the bad ones, in the long run the wheat will be separated from the chaff. It also bears to remember that the average recession since 1950 only lasted 10 months with the longest lasting 18 months. As such, 2025 onwards should be rosier especially as we should be starting to see the beginnings of the productivity revolution and deflation brought about by the AI revolution and digitization of B2B supply chains. It won’t quite be the exuberance of the last decades given that interest rates won’t be nearly as low as they were and that we have not yet addressed our excessive sovereign debt and unsustainable government spending, but it will feel brighter than our gloomy present.

Until then it will pay to remain prudent in our personal and professional endeavors to ready ourselves to start being aggressive and taking risks at the very moment when everyone else thinks that all hope is lost.

FJ Labs Q3 2023 Update

Friends of FJ Labs,

With summer behind us, the team was eager to ramp up investing activities, events, and podcast content these past few months. We are excited to share our recent notable updates in this quarter’s digest!


FJ continues to top “most active” early-stage investor lists in Q3

According to private market investing platform, SignalRank, as of July 2023, FJ Labs was the most active Series A investor YTD and among the top ten at seed. Extremely grateful to our trusted network of VC managers for sending us their best marketplace deals, and to our exceptional investment team for systematically processing hundreds of opportunities each week!



FJ Labs incubation company, Mundi, raised a $15M Series A-2 led by Haymaker Ventures and unveils a multi-product platform for cross-border trade (LatamList)

B2B payments platform, Slope, closed a $30M round led by Union Square Ventures with participation from OpenAI CEO Sam Altman (Forbes)

Berlin-based EV marketplace startup, Cardino, raised a €1M pre-seed round and launched its new online platform, enabling EV sellers to auction their cars to dealerships (TechEu)

Metaloop, a seven-year-old Austrian company that connects scrap metal sellers with buyers, raised a €16M Series A led by FirstMark Capital (TechCrunch)

Paris-based Fairlyne raised a €2.7M seed round to turn non-refundable tickets into resalable fares, led by Speedinvest (EU-Startups)

Online grocery delivery platform, JOKR, raised a $50M Series D financing at a post-money valuation of $800M (TechCrunch)


Earlier this summer, we hosted our bi-annual brainstorm offsite at Fabrice’s home in Turks & Caicos. These events serve as invaluable time for the entire investment team and friends of the firm to discuss the current state of the venture market, marketplace megatrends, and ideas that excite us.

Alongside our friends at Speedinvest, FJ Labs proudly co-sponsored this year’s Marketplace Conference in Berlin. Jose gave the closing keynote address in which he discussed notable marketplace trends and the shifting fundraising landscape. Later in the evening, we enjoyed an intimate dinner with a select group of our Europe-based founders and investors.

Our second “Friends of FJ Labs” event took place in New York earlier this month. This most recent installment featured an evening of padel in Williamsburg followed by dinner and great conversation at Fabrice’s place on the Lower East Side. (Fun fact: Fabrice first blogged about padel back in 2006!)


Please join us in congratulating Matt & Cami on their recent promotions!

Matthew Stone was recently promoted to COO. Since 2019, Matt has seamlessly overseen our Operations and Legal teams, two functions that are core to FJ’s high-volume investment strategy. Matt began his career in GE’s Financial Management Program, and most recently worked as a Senior Director at FTI Consulting.

Camila Bustamante was recently promoted to Associate. Since joining FJ Labs in 2020, Camila has run point on developing core theses in climate tech, mental health investing, and the creator economy. She has also been instrumental in managing our deal pipeline (for which we receive 150+ inbound deals per week!).


If you haven’t already, make sure to check out Fabrice’s recent appearance on Everything Marketplaces in which he details his experience building OLX, what we at FJ Labs look for when investing in marketplace startups, the rise of B2B marketplaces, fundraising tips, and more!

Fabrice’s latest Playing with Unicorns episode features a conversation with Julio Vasconcellos, founder of Atlantico,  a leading early-stage venture fund in Latin America. Julio discusses why he built Atlantico to focus on Series A investing in LatAm and the significant investment potential he sees in the region today

Matias’ Sobremesa series features informal chats with up-and-coming tech entrepreneurs.  Recent guests include Jack Greco, a prolific angel investor and entrepreneur who built a multibillion dollar company, ACV Auctions, and Emily McAteer, founder of Odyssey Energy Solutions, who this year raised a $15M Series A led by Union Square Ventures. 

And for more team writing…

Check out this quick and fun post from Fabrice, The Value of Ignorance, where he explains why one doesn’t need to know everything before starting their entrepreneurial journey.