Thursday, November 1, 2007

Financial Sector Ravages the Dow

I hate to be the one to say it, but I told you so!

If you take a look at my "Beware the Banks and Brokers" piece I wrote back in September, you'll see just what I'm talking about.

Today we saw massive downgrades across the financial space - starting with Citigroup (NYSE: C) and ending with the Dow dropping over 362 points!

Like I said in my Sept. 19th post - the banks/brokerages (Wall Street) are always several months ahead of the curve. They feel the brunt of an economic downturn first, then it spreads to the rest of the market.

Now, this isn't to say that we'll have an all out crash like 2001 - my feeling is that if anything we'll see a mild dip in economic activity and capital investments.

My main concern for my fellow entrepreneurs is if this will trickle down to private equity financings as well. We've obviously been experiencing a bit of a bubble on the private equity front as of late - pre-money start-up valuations haven't been this high in over 6 years and VC activity is continuing to rise as money gets cheaper and cheaper.

I think we'll come out of this just fine but overall I feel that financing activity could start to see a dip as next Summer approaches. That still leaves time to get some money together but I would definitely be looking to keep my burn low, look for creative marketing strategies and execute my a$$ off! So pretty much what most start-up junkies have been doing, but this time leave "getting funded" out of your business plan :)

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