Just like a lot of investors and entrepreneurs, I'm getting nervous. Valuations in Silicon Valley are sky high. The stock market is gyrating. So far, 2015 feels like the start of 1999 (and perhaps 2008) all over again. The old Dot Com implosion could return for an encore -- this time as a Mobile App or cloud implosion. Time for entrepreneurs and investors to run for cover?
First, a little background. When Glassdoor raised $70 million this week, CEO Robert Hohman told Bloomberg: "It's a very good time to raise money. There's a lot of capital available, especially for growth-stage companies that have a demonstrated business model." Glassdoor's current valuation is now $1 billion, according to Bloomberg.
So let's boil down the paragraph above:
- Silicon Valley valuations are sky high.
- Yet money is still easy to come by.
That's a dangerous combination, especially considering VCs like Bill Gurley have been warning us about wild valuations since Sept. 2014.
But Wait: There's More (Or Less)
Now, let's move onto some comments from Andrew Keen, author of The Internet is NOT the Answer. During a TWiT TV interview with Leo Laporte, Keen essentially said today's young tech entrepreneurs are growing arrogant and are out of touch with Main Street USA. Most don't recall the Dot Com implosion. Many dream of becoming billionaires while families struggle to live on $30,000 to $50,000 annually across America. "Silicon Valley has disassociated itself from the world" because of massive valuations, Keen asserted. Plus, he offered this warning: "Every boom is followed by a bust."
Here's the complete interview:
Heck, even Bond King Bill Gross says the good times are over.
Time to Run for The Exits?
I can only speak for me. And in my case, I'm not running for the exit. Instead, my big focus today -- just like the 1999 and 2008 corrections -- is to live within my means, stay diversified and bet on myself.
As an investor, I always take the long-term view. I only invest money in the stock market if I'm willing to keep that sum invested for 5-plus years. And as an entrepreneur, I don't believe there's ever a "wrong" time to launch a company. The only wrong move is to procrastinate.
Think of it this way: Apple and Microsoft launched amid bear markets and weak economic conditions. They didn't wait around hoping for a Wall Street rally. There are similar examples in my own area of expertise -- IT media. Ziff Davis launched in 1927 and survived the great depression; and CMP Media launched in 1972 amid bleak economic times. Both went on to become giants before evolving and/or getting acquired in recent years.
In short: You can't control macroeconomic shifts. But you can keep your own house in order -- both personally and professionally. Invest in your family and your business first -- living below your means every step of the way. If anything is left over, invest in the stock market only if you have a long-term horizon.
A correction is coming. We all know it. We just don't know exactly when.
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