Startups & Macro Markets

I’ve had a number of folks ask me about the macro markets and if that should change their stance on angel investing or their startup. TL;DR: nope.

At a high level, it’s a fool’s errand to try and predict macro market movements, particularly if one is looking at what kind of growth capital or IPO appetite there will be in 5–10 years. Maybe everything will go to pot; China’s growth will catastrophically bottom out, ISIS takes over more territories, North Korea actually nukes Seoul, etc etc.

Or…a Chinese exodus of capital leads to a wave of new funding as the yuan seeks foreign dollar-denominated investments with high growth potential. Or maybe the next wave of machine learning startups give everyone tremendous personal leverage and productivity gains that we haven’t even begun to realize. Maybe real-time manufacturing returns to America with next-gen 3D printers that can cast solids with varying chemical, material, and electrical properties, igniting a movement where it’s not cool to wear the same apparel as anyone else on Earth. Maybe drones open up a whole 3D imaging and transport ecosystem we can barely imagine today. Maybe a resurgence in tinker/builder culture unleashes a post-Millennial generation already hacking together commercial software and hardware for their peers before they’re out of middle school — seriously, kids these days are building Minecraft modules and designing their own kingdoms. I think most 10 year olds in my generation were eating Lucky Charms and watching Saturday Morning Cartoons. Maybe playing some Nintendo.

I have no idea what’s going to happen. I don’t believe anyone does. Certainly if you are confident about an overall trend up or down in a fixed period of time, you should just go ahead and make some derivative bets on the macro markets and make yourself a billionaire (constructive!) instead of armchair quarterbacking the global economy and whining about how everything’s going to hell in a handbasket. Put those clever insights to work, buddy. But I suspect most people won’t. Talk is cheap. Building value is hard.

If you build something that has value, that people enjoy and that makes fast-growing revenues at margins largely under your control, you’ll probably be fine in the long run. If you count on the markets propping you up before you are delivering commensurate real value, your position is a lot more delicate; you’re gambling on sentiment.

For founders, it’s always better to raise more capital than you need but assume that for any round it might be your last and to have a sane Plan B to deal with that possibility. Which should probably involve Actually Making Money.

The markets may go up, the markets may go down. So stay true to your customer and keep shipping greatness.