Maybe the Sky Isn't Falling?

At Frontier, we’ve been thinking a lot about the overall economy lately. We consider it our responsibility to look around the corner to see what challenges might be coming to face the fund or its portfolio companies. For example, in 2007, we advised each of our portfolio CEOs to raise as much capital as they could because we got the feeling that things were going to get tight. It turns out they did! I seem to be surrounded by people who think that the economy is going to tank soon. They say, “it has to happen, it’s part of the cycle.” I agree. And history suggests they are likely correct, at some point. That being said, I can’t seem to find one driver that is going to tank the economy.

Ah, of course events happen, and we can’t always predict. However, as I look at the metrics of many of our portfolio companies, and the metrics of many, many good public companies, I see fantastic businesses, growing, getting customers, driving revenue, increasing value. In 2000, many of the household name internet companies had no supportable business models (OK, that’s happening today too…but less, I think). That’s why the bubble burst. And the banks meltdown in 2008 took everything down with them, even good businesses. I can’t forecast this happening any time soon. Can you? And then you take into account the $144B of VC dry powder being reported by Goldman Sachs in November, and we just think that good companies can still be rewarded, and that the economy feels fairly strong. Several of our portfolio companies are growing well and raising required capital. And our VC colleagues are seeing the same activity in their funds. So, we were interested to read Rey Mashayekhi’s article in Fortune last week: (click here).

Maybe things aren’t quite that bad?

Maybe the sky isn’t falling?