I'm almost 100 percent cash and feeling pretty good about it. Whatever you happen to believe about equities appreciating over the long haul, the first half of 2019 is going to be a bumpy ride at best. The days of an explosive and expansive tech sector--the FAANG stocks that have run the market to such incredible heights--aren't likely to be seen again for some time. I'm seeing months of volatility ahead, which is going to be great for traders but won't do much for consumer confidence or any sense of stability, especially in a time of insane political instability.
Other than Microsoft, which I expect to continue to creep slowly and steadily upstream, I can't see a single one of the other FAANG-class companies (however you count them and whoever you choose to include) that isn't facing product, market, regulatory, or serious competitive issues. These issues are far more likely to drive distractions and detours than any new initiatives, or sustained and profitable growth. And, as the politicians gear up for the next election cycle, it's hard to imagine any lower-hanging fruit for the media-sick morons to pick on than the big guys in the tech sector. Unlike the NRA and the big pharma folks--they've long known how to buy off and hold off the pols--the techies are political babes in the woods. Easy pickings.
So, I'm not looking for much in the way of good news anytime soon, and, frankly, an Uber IPO or an Airbnb buyout isn't gonna really set the markets on fire either. I'm betting that a public offering in this environment for almost any of these unicorns is going to look like a down round, relative to their crazy and over-inflated private valuations, and if you actually know the internal investment numbers and prior valuations. And that's before giving any effect to embedded repricing ratchets and other downward pricing protections that were undoubtedly built into these deals. In my general review of these deals, the entrepreneurs were almost entirely focused on keeping ridiculous levels of voting and board control. And, because everyone told them that the sky was the limit in terms of stock prices, they paid very little attention to the prospect and consequences of any decline in the price of their internal shares. They were smart, but not smart enough.
These bad vibes make me pessimistic about the funding future for startups and early-stage growth businesses--especially those that are still chasing profitability. So my advice is very simple: Get your business ready for the recession. It's coming, and it's no longer really a question of "if" but rather "when" and "how bad." Now's the time to start trimming your sails and resetting your course for at least a year. In a market and a time as crazy as today, there are far fewer penalties to waiting and hunkering down than you would typically incur. Doubling down on your commitments and speeding up expansion activities when everyone lacks visibility makes no sense. Don't be doing things (especially deals) just to keep busy. Busy-ness is a lot different than taking care of business. Random and reckless activity for activity's sake is a poor antidote for whatever actual anxiety you may be experiencing.
Here are a few suggestions about what needs to be done. But, first, I want to modify a few of my own prior pronouncements. Not because they're wrong in the long run, but because they're not right for right now. So, think "yes, but" rather than "yes, and" for a while.
1. Market share expansion occurs mainly in tough times.
Yes, it's definitely easier to grow your piece of the pie when the competition is down-and-out, and you're blessed with a recently acquired war chest (at the moment) and some pricing flexibility, which lets you take advantage of the situation and make some very attractive offers to clients and customers. Or maybe, because the channels are less crowded and there's less demand, you're able to secure better deals or placements or exposure (or even long-term partnerships) that wouldn't be available to you in happier and healthier, but also more competitive, times. These are definitely tantalizing prospects. But cutting your prices to grab customers will almost surely come back to bite you down the line; and there's no guarantee that, if things continue to slow down and get worse, you won't also be looking at some tough times and choices. So, you have my permission to be penny-wise for a while.
2. Don't try to do something cheaply that you shouldn't do at all.
Yes, I've always been a very strong advocate of avoiding anything that amounts to "putting lipstick on a pig" or "steak sauce on a hot dog." It's usually smarter to just say no to these temptations to try to get by with less than your best, but, here again, there are always going to be exceptions to the rule. Right now, my motto for your business--whether you're dealing with dollars for development, money for marketing, a new ad and branding campaign, or growing the team--is pretty simple. "Go for good for now. Great can wait." Even if you've grown and you've got some bucks in the bank, take a breath and a moment to remember the old days when the options were limited to the guerrilla, the down-and-dirty, with getting things done with smarts rather than simply more shekels. Try to get back to those days and those times.
3. You can't save your way to success.
True, but saving a few bucks right now may be your path to staying in the game. In a startup, the only sin you can never rebound from is running out of cash. Because then they send you home. So, it's never worth the risk of cutting things too close or not making sure you've got enough for Plans B and C if it comes to that. Right now, I'd say that the exact things you want to be doing are pretty clear:
a. Conserve your cash
b. Shorten the length of your commitments
c. Stick with the team you have instead of making a bunch of additional bets on unproven players
d. Don't let your mouth or your ego write checks that you can't cash or cover
In the end, it all comes down to money. Money doesn't really care who makes it. Money is always there; it's just the pockets that change. And money does talk. You just want to be sure that it doesn't say, "Goodbye."