Entrepreneurs are not by nature people who walk around with a Plan B in their pocket. Even though it goes against the grain. It goes against the unflagging optimism and sense of “I can do this” that keeps great entrepreneurs going long after others have given up. But successful entrepreneurs are also savvy, practical survivors.
Great entrepreneurs are also masters of timing. The master of timing in Web 1.0 was Steve Case, when he persuaded Time Warner that AOL was their equal in a merger. It was so outrageous that it was the signal that triggered the end of the Web 1.0 boom. Of course when history does repeat itself - as it usually does - it does so with a surprising twist that takes everybody by surprise. The obvious parallel today, Facebook and Microsoft, does not apply. Microsoft is only investing what is a rounding error for them; and they may well have a preferred rate, which means that in the worst case they get the same return as they get on their cash hoard in Bonds.
So, no, I am not calling a bubble or even forecasting the timing of a recession. But I would say that one of the following should be on the To Do List for entrepreneurs in the current climate (which one depends on the lifestage of your venture):
1. Raise more money (a lot more) than you think you need. VCs have plenty of money to put to work and you need enough to ride out a cycle and really build something to last. Jason Calacanis said he raised enough for 5 years with Mahalo and he has seen a cycle come and go.
2. Get to cash flow positive quicker than you had planned. (And if you are already there, don’t take this as the time to start a major expansion built on borrowed money).
3. Accept that offer. Not the first one of course. Not the second one if you have good poker nerves. But take the third one. Live to venture another day.
The aim of many entrepreneurs is to take a business idea and convert it into a professional and functioning business on a low budget. This is typically called “bootstrapping” and it is fraught with potential pitfalls and dangers. But when done well it can really help get a company going fast, professionally and without the founders having to give up much (if any) equity - or bankrupting themselves.
Wiki : Bootstrapping