Risks for Investors and Entrepreneurs

A local Minnesota serial entrepreneur, Philip Hotchkiss, gave me a heads-up on this post from a a serial entrepreneur turned VC, Mark Suster. After reading it I was compelled to post about it here on Minnov8 and strongly encourage you to read it.

Though I’m a glass-is-more-than-half-full kind of guy and am constantly seeking out silver linings, opportunities and the positive, I wouldn’t be a good risk manager if part of that seeking didn’t acknowledge input that pointed out the downsides and the negative so I could modify our business strategies.

Suster starts off talking about the “funding frenzy” occurring in 2010 and later in the article discusses why this concerns him. He points out that the US economy has structural employment issues, consumer’s “piggy banks” (i.e., their houses) are empty, the appetite for government stimulus has waned, and what he sees as an end-of-year stock market sell-off will negatively affect VCs and angel investors.

His argument is that 2011 is likely to be bleak and that this year’s initial funding rounds, while fabulous due to that funding frenzy, could leave entrepreneurs in a “funding gap” as VC money dries up.

If you have time, read the entire article of if not, this post was originally published in a shorter format in the Wall Street Journal online.  Either way, read it.

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