It’s really hard to catch a falling knife without getting caught. I’m sure the recent whip-saw movements in Wall Street (and the resulting effects in global equity markets) have left many of you breathless, and hopefully none less worse the wear.
Unfortunately, our friends over in the Valley have been roiled in Wall Street’s eddies – from ominous doomsday predictions by Sequoia, to never-ending staff cuts by startups such as hi5, Zivity, SearchMe, Pandora, Zillow and falling venture investments – the end never seemed as far from sight as now.
While I was in the Valley, I received a call from S, founder-entrepreneur of a Singapore-based start-up. He sounded really desperate, and asked me to help him look out for folks who might be interested in gaining access to the India market. I chose to leave out the part where other entrepreneurs and management of companies were likely to be too busy hunkering down and thinking about survival to think about the India market, and simply promised him that I will try my best.
Over lunch today, my friend V, who is founder and CEO of another Singapore web start-up, shared with me that he only had until the end of this year to convince his team of the revenue model. It was difficult for him to expect his team to survive on S$500 a month each and live like students, and he was mentally preparing himself to lose the entire team to the harsh reality.
At work, the air is thick with caution. My girlfriend, who works at a financial services with 2,800 staff in Asia and Europe and approximately US$600 million of shareholder funds, has been advised of potential wage freezes and/or wage cuts.
In July, I wrote about the six winners for the NRF Early Stage Venture Fund. Given the mess that we are in, I do not have confidence these funds will be able to have their first close anytime soon. Firms with more established track records should eventually be able to raise their funds anyway, but even then, investment into low-visibility early-stage ventures (in view of P/E ratios of 2 – 3 in public markets) would need significant justifying to their investment committees. The entrepreneurial ecosystem never really recovered from the dot com bust in the early 2000s, and I am concerned we will never again have a fighting chance post-subprime. I’m thinking we’re probably going to see more bad news come December, post-X’mas. By then, the dip in consumer spending would be too obvious for any economist, analyst or layman to dismiss.
Herein lies an opportunity for our Government to act, to fill the gap left by ailing market forces and encourage risk-taking, innovation and value creation in a time where people have much less to lose. Only time can tell how our esteemed political ruling elite will fare in their response to an unparalleled opportunity. We were too slow in hopping onto the dot com boom, and too slow to hop off it when the ride ended. I only hope that we can rise above ‘analysis paralysis’, and act decisively with some backbone.
In the meantime, join me as I pray for my entrepreneur friends in Singapore and in the Valley as they ride out this unfortunate and inconvenient storm.