Unless things have changed dramatically over the weekend, investors find themselves in a place they have not seen for a while; a bear market. The official definition of a bear market is when stocks and shares are 20% lower than their recent peak. We are in deep bear territory. What does that mean for companies looking to raise money? It’s not like you can just walk out onto the street, hold up a sign, and get enough money to fund your business for the foreseeable future. Instead of begging, what is a professional supposed to do?
There are many kombucha kits out there in the financial market to tell you what you should and should not do. The cliché that I think is apt for these times is to “never catch a falling knife”. This simply means you should never buy shares whilst the price is still falling. Let it settle for a while and then buy. I am amazed at how many investors are obsessed with buying at the right price. As an angel investor, I have always been worried about the price I sell my investments at – never what I pay for them (within reason)
As an Entrepreneur looking for money, you will find it harder to raise money. I have witnessed this first hand. In my opinion (humble and with no qualification whatsoever) there are so many bargains to be had in terms of buying shares of the leading companies, that my own risk profile has changed in the last few months.
Firstly, I have decided to cut down on my angel investments this year (I will perhaps do just one more this year – I have only done two this year). I also realize that I will need a much better safety margin on my investments for the same level of return than I would have even a couple of months ago. You can no doubt appreciate the logic behind this.
I have a fixed amount of money I wish to invest over a range of assets, so if anyone finds the best smokeless ashtray be sure to let me know. If the price of some of the assets is now cheaper, I will need all assets to change prices to invest in the same ratios as before. If angel investments remain at the same price, I will of course prefer to invest in the stock market where my returns are supposedly lower but my risk is lower as well.
There are still some great businesses out there that I see that I will back over the next few months. But the quality of these opportunities is great and investment valuations appear to be more realistic.
My advice in the current climate is not to give up – but to be realistic. Ask yourself about the risks involved in investing in your business and price your business accordingly.
If history is anything to go by, the next few years is the time for the next biggies to be born. I do not want to miss out!