This will have an impact on the flow of money to VC's, which will have an impact on the flow of burnable cash to unprofitable startups. No more $1.5 million rounds for apps like Yo [1] (the investor community should be embarrassed and horrified that this kind of thing was getting financed anyway).
Winter is indeed coming for those that don't have a business model, and that's a good thing.
I wonder how big an impact this will have though. As much as there are apps without business models, there are many solid products solving real problems that already have real revenue and customers behind them contrary to the dotcom bubble.
Sure some tightening of the belt might happen, but is there really any way to say how much?
No, the institutions who allocate money to VC typically do so as part of a long (> 30 year) horizon plan based upon portfolio theory. There are no institutional investors for whom a 25 bp change in a short term interest rate will materially alter their allocation to VC (typically a tiny sub-portion of a minor portion allocated to "private equity," the lion's share of which goes to later-stage buyout).
Private equity and, in particular, venture capital, are part of that allocation precisely because their outcomes are relatively uncorrelated to, say, public stocks and bonds -- which are very correlated to interest rates.
The flow of easy money to VC's has dramatically increased because of zero/negative interest rates - not just in the US but around the world. That flow of money will slow in a positive interest rate environment, which means less money for low quality startups.
Winter comes when exits dry up. After all, the exit is where the VCs make their money. Valuations don't mean anything until a VC can get out of his equity position and into cash or another liquid asset.
We are starting to see valuation corrections with large funds writing down investments in startups in later rounds, and IPOs proving to be very tricky to sell correctly to the market.
A recent example: Square IPOd at $11.20 for a market cap of $3.5b (was valued at $5bn in 2014) and, more importantly, only floated 8% of its stock on the IPO. This means that supply was so low that they essentially guaranteed a pop in price as there was bound to be more demand at this lower price and for such a limited number of shares. This is not how an aggressive, confident IPO is structured.
So once the exit round starts to gum up, it will have a chain reaction on all earlier rounds as people re-evaluate the likelihood and size of an exit. The crash will be swift.
Winter is indeed coming for those that don't have a business model, and that's a good thing.
[1] http://www.businessinsider.com/yo-raises-15-million-at-a-5-1...