This is the fifth of our annual letters in which we discuss our observations and reflections of the year passed, how they’ve shaped our investment views, and other ideas on real estate, technology, and markets.

As an organization, we have tried to be flexible in how we allocate and deploy capital, whether it’s investing across stages from seed to growth, funding strategic acquisitions and seeking M&A opportunities for our portfolio or making public market investments.

With each opportunity we weigh the risks with the information at the time, and if we believe an opportunity is priced correctly, we take the risk.

Currently, we find ourselves navigating one of the most complicated environments of the past 20+ years of real estate and technology investing.

As we enter a sustained period of non-zero interest rates, discipline of mission must now also intersect with discipline of management and operation. Efficiency, risk management, business model fundamentals, and most importantly, sustained profitability, are must-haves – not nice-to-haves.

As much as we’d like to put 2022 in the rearview mirror, it’s important to reflect and acknowledge how we got here. The past year brought several lessons, which have informed (and in some cases confirmed) how we think about the future.

The era of excess, abundance, and zero interest-rate policy has come to an end. Last year, we likened it to ending the best party in town – but instead of simply turning on the lights, the past year has been more akin to getting cold water thrown in our faces.

 Our advice to founders:

Profits and cash flows matter again, and growth must be balanced with attractive margins to create sustainable business models that will endure the test of time.

Higher rates may have hindered valuations for now, however, the incremental returns on technology are ironically higher in an inflationary environment. More expensive labor and raw material inputs create even greater incentives to invest in technology to reduce costs elsewhere, so we remain bullish on technology as a key driver of societal progress.

Catamon Investors Group has always taken a long-term, fundamental approach to investing, which has helped us to weather market volatility and deliver strong returns. We believe that our approach will continue to be successful in the long run. We are confident that we can navigate the current market conditions and identify new and exciting opportunities for growth.