While thinking about wiggles (Ignoring the Wiggles ), I looked at when the biggest tech cos in the world started relative to NASDAQ. At first, I thought I'd find no correlation between how well the index was doing and when successful companies were founded.
I love looking at this in chart form, which shows just how many market moves these companies have weathered as they've grown.
I was actually surprised to discover that most of the companies on my list were founded while the market was doing relatively well on a trailing 1, 3, and 12 month bases.
Of course, if the founders of Microsoft, Google, and Cisco had looked at the returns of the NASDAQ in the year leading up their decisions to start their companies, we wouldn't have three of the most successful companies in history. I'm glad they didn't stare at the market wiggles.
There's also an important lesson in here for me as an investor. It's easy to get excited about startups when startups are doing well and when the economy is roaring. It's harder to be as excited when public markets are down and I'm seeing flat and down rounds. The easy sounding lesson to draw is usually along the lines of being aggressive when others are fearful, and conservative when others are aggressive.
But I don't actually think that's right, I think the right answer is to ignore everything else and judge founders and their companies on their fundamentals. That seems clean and easy in principle, but is difficult to put into practice because one of the things investors do is make a bet on the paths of markets over time. When markets seem to be saying bad things about the future, and market pricing is a bet on the future, it can be tough to ignore them or bet explicitly against them. If markets are exuberant, it's almost as difficult to be confident that you're paying an appropriately high price or investing in an actual good company. It takes time to form that confidence on the basis of fact rather than just guessing and justifying it later. I'm still working on that.
There's also an important lesson in here for me as an investor. It's easy to get excited about startups when startups are doing well and when the economy is roaring. It's harder to be as excited when public markets are down and I'm seeing flat and down rounds. The easy sounding lesson to draw is usually along the lines of being aggressive when others are fearful, and conservative when others are aggressive.
But I don't actually think that's right, I think the right answer is to ignore everything else and judge founders and their companies on their fundamentals. That seems clean and easy in principle, but is difficult to put into practice because one of the things investors do is make a bet on the paths of markets over time. When markets seem to be saying bad things about the future, and market pricing is a bet on the future, it can be tough to ignore them or bet explicitly against them. If markets are exuberant, it's almost as difficult to be confident that you're paying an appropriately high price or investing in an actual good company. It takes time to form that confidence on the basis of fact rather than just guessing and justifying it later. I'm still working on that.
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[1] Data is from http://www.macrotrends.net/. Scale is log.