I’m not sure who needs to hear this but here goes – now is the time to be ambitious when others are fearful.
Just keep building things your customers want.
I’ve spent the last few years as a venture capitalist, and now I’m back on the frontlines as an entrepreneur.
Last year, while still working in venture as markets were swelling higher, I wrote an article with advice for entrepreneurs that markets would change (read it here). These predictions have all come true.
Now on the other side as an entrepreneur again, I have advice for myself, other entrepreneurs, and investors: Be ambitious when others are fearful.
The value of equity (both private and public) will keep moving up and down.
Markets will whipsaw and many entrepreneurs and investors will overreact. Collective anxiety feeds off itself.
Remember – things are never as bad as they look when markets adjust pricing, nor as good as they look when we’re at a frothy peak. These cycles are perennial, and there is truly nothing new under the sun.
This pattern keeps repeating over and over – it’s built into markets and human psychology. It’s truly perennial.
Be ambitious when others are fearful.
Just keep building.
The next few months will bring lots of great stories of growth, but I’d predict it will bring a much higher mix of stories of flame outs and re-adjustment in value – both in public markets (which we’re already seeing) and of course, with startups.
More specifically – expect big new stories about previously high-flying companies going bankrupt or having massive layoffs. Stories about companies burning tens of millions a month previously with SPACs lined up, now going bankrupt or selling at a fraction of previous valuations. Stories about overvalued companies taking down rounds – not because they’re not growing, but because valuations / market prices change over time – and if you raised in mid/late 2021 when things were closer to a peak, you’ll need to grow 3-5x just to grow into new valuations (gone are the days, at least for now, of SaaS company valuations as high as 100-250x ARR).
The Fed pumped too much money into the system, and interest rates will rise significantly.
Expect more hyped up news stories about worsening home affordability and fear of inflation.
Expect politicians – especially those in election cycles – to stoke these fears.
This is not new or surprising.
We live in an economy that cycles up and down. Now, at age 40, I’ve seen this a few times, but I’m cognizant that many more founders and younger investors haven’t.
Great companies are built when others are fearful. Think Steve Jobs and Apple.
Great investors double down when others are fearful. Think Buffett propping up Goldman Sachs in 2008.
Investors and founders should work together to find a balance – one that gives investors reasonable ownership without over diluting founders. This builds a healthy, respectful relationship set up for long term collaboration and success, not resentment.
For entrepreneurs – if you have options, choose investors who are even-keeled and think long term.
You can verify this by seeing their investment pace during a micro-vintage of early/mid 2020 right when the pandemic hit. Were they making more investments or did they freeze up and stop? I’d be wary if they were on the sidelines then. They’re likely to overreact and be fearful in the future. Not people you’d want on your cap table when times inevitably get tough.
To quote from Tony Robbins – “What you focus on, you feel”.
Are you going to focus on being alive for another day of life, or the gift of your beating heart, or the mystery that put you in this human experience on a piece of rock floating in the midst of 93 billion light years of empty space, or the human beings you’re building a business to serve?
Or, are you going to focus on all the things that aren’t going quite right or that worry you?
Whatever you focus on, you will feel. This directly impacts the quality of your decisions and ultimately your results.
It’s your choice, and you can absolutely discipline your mind if you make it a priority.
The world keeps changing. Prices will keep cycling up and down. But what is perennially true is that there are billions of people who have real needs that need real solutions for.
I’m focused on solving a few of these for millions of lower income and middle class families in Latin America (and eventually globally), and this work brings me to life.
Focus on what brings *you* to life. Talk to customers whose needs deeply resonate with your passions and experience. Meanwhile,markets will swing up and down continuously, amplified by the news cycle and the deeply networked nature of our modern world.
The antidote is to be ambitious when others are fearful. Get heads down and build. Disconnect from the external hysteria and serve others, your customers.
And for extra credit – remind yourself how lucky you are to be able to be doing this work, rather than fighting for your life in a war zone.
Use your time and resources for good.
Just keep building.