Raise Money Now. There Are Storms Ahead
Mark Suster, Both Sides of the Table
Aug. 31, 2010
One year ago I predicted that in 2010/11 the economy, far from being on the path of permanent recovery was on a temporary resurgence and there was a strong possibility of a “double dip” recession.
My advice to entrepreneurs was and is “when the hors d’oeuvres tray is being passed take two” (e.g. raise money now to weather any storms).
My original thinking from Oct ’09 was, while I didn’t (and still don’t) have a crystal ball I worried that: consumers were over-stretched with debt (and make up 77% of the economy), unemployment would continue to rise, which in turn would drive the stock market south and cut the rate of M&A activity and VC investment even further.
Sounds obvious now, but as I wrote the original piece the DJIA had already come roaring back from 6,600 to 9,865 so it was certainly against conventional wisdom. It eventually closed at 11,204 in April ’10 before sliding back around 10,000 as I sit here and type. Well before the recent decline I sent out a Tweet that said, “Many will disagree but I still fear deflation, structural unemployment and political malaise.” Scott Austin of the WSJ (worth following) saw my Tweet and asked me to go on record with my rationale.
So I agreed to offer my current thinking on the economy and what it portends for the VC industry & fund raising for entrepreneurs.
Let me preface by saying I obviously have a vested interest in being wrong about tough times ahead but as the old saying goes, “hope for best, plan for the worst.”