In response to a comment to my post earlier this week about the Profit Imperative, I rattled off some ideas about the current state of the markets. I thought it was worth sharing as a full post (I’ve edited and expanded on the original comment). There are clearly headwinds in the markets – I’m not at all suggesting that there aren’t. And we may be in a period of strong negative pricing pressure in both the public and private markets. As you know, markets tend to perpetuate themselves and pendulum. This cycle of overreacting is how business and market cycles seem to work. Without a doubt we’re in an environment of increasing volatility and that volatility alone may spook some investors. Price shifts…
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bubble
The Profit Imperative
With the markets crashing around us and the sky once again falling I thought it was time to revisit a few fundamentals and perhaps more importantly share some what what we’re now seeing in the private funding markets. Growing Profitably. Let’s start with what I labeled the Growth Imperative a few months ago in a post, where I pointed out 1) that investors were (over) valuing growth and 2) that when this changed it was going to change quickly (and in a separate post said: “when the growth imperative shifts to a profit focus, companies with high burn and weak operating metrics can get stuck in the lurch.”). It always amazes me how quickly the markets can shift and how…
This may not be the bubble you’re looking for
At great risk of wading into a debate where there’s no winning, I thought I’d present a few pieces of data that suggest that we’re not exactly in a market bubble right now. Massive caveat here: I’m not trying to predict the stock market. I’m just following my own advice. Plus I agree with my partner Brad, who said recently, “I think everyone will have an opinion and no one will have any real idea,” about what’s going to happen in the stock market (this in an article that appeared after just two days of a down market). But the data are important, so let’s at least pay attention to what’s actually going on. From there you can form your own…
The growth imperative (but beware)
First off, a note of apology. It’s been months since I’ve posed here. Not for lack of desire – more about some combination of crazy busyness and lack of proper prioritization. I miss it and am going to try to step it up. This is a post about the importance of growth, about the current market environment and a note of caution if the growth imperative changes rapidly to the profitability imperative. A few months ago we held a “SaaS Summit” for about 130 people from across the Foundry Group portfolio. It was a great chance to compare notes, meet far flung colleagues (“cousins” as we sometimes refer to employees at different portfolio companies) and discuss a variety of topics…
Pattern recognition
VC’s love to talk about their pattern mapping abilities. “We add more value because we’ve seen so many companies go through all sorts of situations before and we can quickly map whatever’s happening at your business to what we’ve seen in the past and leverage this experience.” Or so the logic goes. But what’s going on right now with early stage company valuations suggests that VCs may be poor judges of at least some of these patterns. Or at least that they’re incredibly human when it comes to estimating the likelihood of certain events actually happening. In 2002 a series of random shootings rocked the Washington DC area. For a period of about two weeks, an unknown assailant killed 10…
The real bubble
While there’s been plenty of discussion and debate about whether we’re in some kind of valuation/venture bubble right now for early stage tech, there is one bubble that I’m pretty sure of. I’m seeing more great business ideas right now than I can remember seeing at any time in my 10 year venture career. We typically see around 1,500 business plans a year at Foundry (we actually see more than that, but this is the approximate number that are relevant to our investment focus). On average we’ll take a meeting with somewhere around 10-15% of these and hear a bit more than what was in the introductory email or initial business plan. And we typically invest in 8 (our Foundry…