The Federal Reserve raised its benchmark interest rate for the first time since 2018, opening what would become the most aggressive tightening cycle in four decades as it scrambled to contain the sharpest inflation in a generation. For the startup economy, the decision marked a regime change.

The venture model of the prior two years had been underwritten by the assumption of near-free money. As the discount rate climbed, the present value of far-off growth collapsed, and the crossover investors who had flooded late-stage rounds retreated to public markets and fixed income almost as quickly as they had arrived.

By the third quarter, global venture funding had fallen 53% year over year. Growth-stage capital effectively vanished, forcing a violent recalibration: down rounds, structured deals loaded with investor protections, layoffs, and a sudden, industry-wide fixation on the words 'default alive.'

The hangover would define the next 18 months. Companies that had raised at 2021 multiples now faced the choice of raising flat, raising down, or not raising at all — and the repricing eventually reached even the ecosystem's most trusted institutions.