In July I wrote a message to my founders, warning that things could get choppy, titled “This is your Captain speaking, I’m turning on the fasten seat belt sign.”
Well, this is your captain again, and we’ve got turbulence ahead so I’m canceling drink service and asking everyone to check your seatbelts.
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On the day I wrote the last piece the NASDAQ was at 7,932 (July 25th), and over the next couple of months, it crashed over 20% to 6,192.
It’s since recovered to ~7,000.
While no one can time the market, you don’t need a weatherman to know which way the wind blows.
The Black Swans are hiding all around us in plain sight, while at the same time big tech companies have soaring sales, letting them build mountains and mountains of cash.
When I look out there I see three things that make me cautious:
- The Russian investigation combined with the growing impeachment movement
- The Chinese trade war combined with the arrest of the Huawei CFO in Canada and another employee in Poland. A Canadian citizen in China has been sentenced to death for drug smuggling, as well — coincidence?
- The Corporate Debt bubble
In the last piece, I explained to founders what happens when things collapse. In short, angels and VCs slow or stop investing, and the startups with under a year of revenue and no prospects of hitting breakeven go away.
Will the market crash? No one knows, but I do know that the Boy Scout motto is as true today as it has ever been: be prepared!
Bottom line: For my founders, I want you all to check that you have 18 months of runway in your bank and a clear path to profitability — if you’re not profitable yet. Be. Pre. Pared.