What the current markets are and are not telling us
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 at the top of the market, starting with the public markets and quickly spreading to the public market investors who had been dipping into the late stage private markets and continuing from there, will and are clearly changing pricing across all stages of private market financings. …
February 17, 2016· 4 min read
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 rapidly investors change their mind set. But they do, and they are right now. We’re seeing lots of market data points that suggest that the private markets have shifted dramatically to a Profit Imperative, overnight eschewing high growth/high burn with no line of site to profitability and favoring companies that are growing more slowly but doing so profitability or with a clear path to profitability. There’s an increased focus on key metrics – especially those core metrics that drive the spend/growth curve such as LTV/CAC and months to pay back CAC. …
February 10, 2016· 3 min read