startups as financial instruments

During these challenging economic times, we are reminded profit and cash rule.

The private equity market (venture capital) is melting. Large, high-flying funds are losing much of their value. Well-funded startups that are supposed rocketships are laying people off and struggling to keep their doors open. Crypto is declining rapidly in value. The federal reserve is trying to balance reducing inflation without weakening the economy further, and it is a tall order. All signs point to things getting worse before they get better. The companies, from startups, through the mid=market, and up to larger enterprises, that are profitable and have cash reserves they can deploy are in the best position to get them through tough economic times.

The current venture and startup bubble are reminiscent of the dot com bubble in the late 90s but even more of the housing bubble in 2008. Companies have received valuations and funding that outstrip any rational perspective, and the companies would never be able to perform up to the valuations. Venture has become too much of a shell game in many cases.

Venture capital firms need to provide a return to their investors, and neither the firm nor investors care how the returns happen. Acquisition or IPO, great. Another round of funding at a higher valuation so current investors can be bought out, great. The…