&l;p class=&q;Body&q; align=&q;left&q;&g;As an entrepreneur, I went through the Swedish financial crisis of the early 1990&a;rsquo;s, and as an investor I have experienced both the 200&l;span class=&q;None&q;&g;&l;span&g;0 &l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;dot-com crash and the 2008 financial crash. &l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;A couple of&a;nbsp;&l;/span&g;&l;span&g;years ago, I stated that I was &l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;100% convinced that we &l;/span&g;&l;span&g;would&a;nbsp;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;see a sharp downward correction in the technology market in the not-so-distant future. &l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;I am aware of the fact that the more&a;nbsp;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;often&a;nbsp;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;I say it&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;, &l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;the higher the chance that I will eventually be right&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;. The question is not if, but when it will happen and of course also what to name it. We have had the &l;/span&g;&l;span&g;&a;ldquo;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;railroad crash,&l;/span&g;&l;span&g;&a;rdquo; &a;ldquo;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;great depression,&l;/span&g;&l;span&g;&a;rdquo; &a;ldquo;oil crisis&a;rdquo; &l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;and&a;nbsp;&l;/span&g;&l;span&g;&a;ldquo;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;dot-com&a;nbsp;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;crash.&l;/span&g;&l;span&g;&a;rdquo;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;&a;nbsp;Maybe go for something more poetic this time? Why not the&a;nbsp;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;&l;/span&g;&l;span&g;&a;ldquo;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;Urban mobility&a;nbsp;&l;/span&g;&l;span&g;demolition derby&a;rdquo; or &q;The slaughter of the Unicorns?&a;rdquo;&l;/span&g;&l;/span&g;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span class=&q;None&q;&g;&l;span&g;It is incredible to see how quick the market forgets about earlier downturns. The excesses are back, and again I hear talk about &l;/span&g;&l;span&g;&a;ldquo;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;the new economy,&l;/span&g;&l;span&g;&a;rdquo;&l;/span&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;span&g;&a;nbsp;&l;/span&g;&l;/span&g;&a;rdquo;this time it&a;rsquo;s different&q;&a;nbsp;&l;span&g;and &a;rdquo;we&a;rsquo;ll figure out the business model later.&a;rdquo;&l;/span&g;&a;nbsp;We have a whole generation of investors, entrepreneurs and &l;span&g;startup &l;/span&g;employees with no recollection or experience from the financial crisis of 2008 when there was &l;span class=&q;None&q;&g;&l;b&g;&l;span&g;NO&a;nbsp;&l;/span&g;&l;/b&g;&l;/span&g;&l;span class=&q;None&q;&g;&l;b&g;&l;i&g;&l;span&g;&l;/span&g;&l;/i&g;&l;/b&g;&l;/span&g;money to be found anywhere.&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;A quick Google search will give you hundreds of interesting graphs showing the future of any market heading in any direction. There are numerous &l;span&g;VC&s;s, &l;/span&g;analysts and experts that are better versed than I in the underlying number crunching. To mention a few, &l;span&g;check out Mark Suster (@msuster)&a;nbsp;&l;/span&g;from Upfront Ventures &l;span&g;on &l;/span&g;&l;span class=&q;Hyperlink0&q;&g;&l;span&g;&l;a href=&q;https://bothsidesofthetable.com/why-has-seed-investing-declined-and-what-does-this-mean-for-the-future-6a9572357130&q; target=&q;_blank&q;&g;seed investing decline&l;/a&g;&l;/span&g;&l;/span&g;, Tom Wehmeier (@twehmeier) from Atomico on the &l;span class=&q;Hyperlink1&q;&g;&l;a href=&q;https://2018.stateofeuropeantech.com/&q; target=&q;_blank&q;&g;State of European Tech&l;/a&g;&a;nbsp;&l;/span&g;and Anand Sanwal (@asanwal) from CB Insights on everything &l;span class=&q;Hyperlink1&q;&g;&l;a href=&q;https://www.cbinsights.com/&q; target=&q;_blank&q;&g;technology, investing and startups&l;/a&g;&a;nbsp;&l;/span&g;related. As an early stage deep tech investor (with the lack of a better description) I base my decisions on long term macro perspectives; the excellent work from people like the ones mentioned above, but also on my own subjective &l;span&g;observations&a;nbsp;&l;/span&g;(or gut feeling&a;nbsp;&l;span&g;&l;/span&g;if you will) of&a;nbsp;&l;span&g;potential signs that this tech bubble is soon to &l;/span&g;see a sharp correction&l;span&g;, i.e., things that I haven&a;rsquo;t seen since before the last &l;/span&g;downturn:&l;span class=&q;None&q;&g;&l;span&g;&l;/span&g;&l;/span&g;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span class=&q;None&q;&g;&l;b&g;&l;span&g;First,&a;nbsp;&l;/span&g;&l;/b&g;&l;/span&g;in the market today there is an enormous surplus of available and risk prone money that is looking for returns higher than what you get in the&a;nbsp;&l;span&g;&l;/span&g;bond market (i.e. anything more than zero). &l;span&g;Every other day&a;nbsp;&l;/span&g;I hear or see news that later stage investors are turning to earlier stages because of the &q;amazing opportunities&l;span&g;,&q; and I have heard&a;nbsp;&l;/span&g;&l;span&g;&l;/span&g;&l;span&g;many &l;/span&g;&l;span&g;fund manager&l;/span&g;&l;span&g;s&a;nbsp;&l;/span&g;say that they are moving to earlier stages because of this.&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;You also see examples of private equity investors (by default with focus on &q;&l;span&g;traditional,&l;/span&g;&a;rdquo; &q;late&a;rdquo; and &a;ldquo;mature&a;rdquo; investments) launching venture capital funds. &l;span&g;Yet, &l;/span&g;&l;span class=&q;Hyperlink1&q;&g;&l;span&g;&l;a href=&q;https://twitter.com/ncklsbrgmn/status/1092683549503836160&q; target=&q;_blank&q;&g;when investments are returning 0-1x their value 64.8% and 1-5x only 25.3% of the time&l;/a&g;&a;nbsp;&l;/span&g;&l;/span&g;&l;span&g;(with anything more few and far between), you would be surprised to learn that hesitancy in investment is now a virtue. With the result being what&a;nbsp;&l;/span&g;are almost as good (or bad) signs as when your cab driver gives you advice on the stock market. SELL SELL SELL!&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;That said, it is also a fact that once interest rates go up (and eventually they will)&a;nbsp;&l;span&g;from their historically low current level&l;/span&g;, investor appetite for low margin, high competition businesses will disappear overnight. &l;span class=&q;None&q;&g;&l;span&g;&l;/span&g;&l;/span&g;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span class=&q;None&q;&g;&l;b&g;&l;span&g;Second, &l;/span&g;&l;/b&g;&l;/span&g;you suddenly see people in traditionally high salary &l;span&g;(low risk) &l;/span&g;professions such as investment banking, management consulting and law jumping ship and founding or joining start-ups. Really happy for them if they see an opportunity to &q;live the entrepreneurial dream,&a;rdquo; but I have seen it before, and in many cases it is unfortunately just a sign of jealousy of all the money that is rumored to be made in the start-up world. Believe me, it is not as easy as it looks.&l;span class=&q;None&q;&g;&l;span&g;&l;/span&g;&l;/span&g;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;Also, employees today take big risks when joining companies with large negative cash flows, lured by &q;&l;span&g;impressive&l;/span&g;&a;rdquo; stock option programs that makes the companies hard to evaluate for an external investor, and &l;span&g;multi-million&a;nbsp;&l;/span&g;acquihires (acquiring companies mainly to secure engineering talent) also point in the same direction.&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span&g;However this will soon become a thing of the past as the startup boom draws to a close. Advances in hardware have already begun to rob these smaller companies of prototyping possibilities due to hardware&a;rsquo;s increasingly expensive and complex nature. In terms of data, startups can never hope to achieve the levels already achieved by the Big Five, further hampering efforts to stand out when developing AI systems. In the self-driving space, startups are offering themselves up for acquisition rather than challenging the status quo &a;ndash; some will undoubtedly be acquired, but it is increasingly unlikely that they will become major player&l;/span&g;&l;span&g;s&a;nbsp;&l;/span&g;&l;span&g;themselves. Instead playing fiddle to the kings court and offering tribute.&l;/span&g;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span&g;This is because incumbents have access to much of what startups would kill for. Not only when it comes to data, but to clients, client relationships, people and, of course, money. For the incumbents who have survived this past decade, we can expect to see them continue to consolidate power in the year&a;rsquo;s to come &a;ndash; what doesn&a;rsquo;t kill you makes you stronger.&a;nbsp;&l;/span&g;&l;span&g;The question is if established companies will be able to ramp up innovation before startups ramp up user growth, and this goes for &q;all&l;/span&g;&a;rdquo; industries.&l;span class=&q;None&q;&g;&l;span&g;&l;/span&g;&l;/span&g;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span class=&q;None&q;&g;&l;b&g;&l;span&g;Third,&a;nbsp;&l;/span&g;&l;/b&g;&l;/span&g;we see outrageous valuations with no or low profits, at least in relation to the level of funding. Also we have examples of private, venture-funded technology companies with vastly higher valuations than public ones post IPO. The argument for these valuations is that it is different this time (yes, some of us have heard that one before).&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span&g;How overvalued? One study of 135 U.S. unicorns &l;/span&g;&a;ndash; private companies with reported valuations above $1 billion &a;ndash; &l;span&g;suggests that a&l;/span&g;fter adjusting for valuation-inflating terms&a;nbsp;&l;span&g;such as different share classes&l;/span&g;, &l;span class=&q;Hyperlink1&q;&g;&l;a href=&q;https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2955455&q; target=&q;_blank&q;&g;almost one-half&l;/a&g;&a;nbsp;&l;/span&g;(65 out of 135)&a;nbsp;&l;span&g;l&l;/span&g;ose their unicorn status&l;span&g;. That&a;rsquo;s a lot of donkeys in disguise.&l;/span&g;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;One of the &q;new&a;rdquo; explanations and excuses for &l;span&g;these larger-than-life valuations&a;nbsp;&l;/span&g;is that priority No. 1 is customer acquisition and data mining of user data. This is even more important than actual revenues and (God forbid) profits. The thinking goes that once the users are in place, we can start working on business and revenue models. This is perfectly OK as long as venture funding is available and investors value a customer base higher than the bottom line, but will not work once the investor chicken race is over.&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;Again, as in 2000 we see &q;&l;span&g;entrepreneurs&l;/span&g;&a;rdquo; believing that venture funding is a viable business model in itself. &l;span&g;An alarming &l;/span&g;endeavor&a;nbsp;&l;span&g;&l;/span&g;&l;span class=&q;Hyperlink1&q;&g;&l;a href=&q;https://news.crunchbase.com/news/over-80-of-2018-ipos-are-unprofitable-setting-new-record/&q; target=&q;_blank&q;&g;&l;span&g;when 80%&a;nbsp;&l;/span&g;of the companies that went public last year were unprofitable&l;/a&g;&l;/span&g;&l;span&g;, t&l;/span&g;he largest number since the peak of the dot-com boom in 2000, when 81&l;span&g;% &l;/span&g;of newly public companies were unprofitable.&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span class=&q;None&q;&g;&l;b&g;&l;span&g;Fourth,&a;nbsp;&l;/span&g;&l;/b&g;&l;/span&g;in an expanding market, money is &q;easily&a;rdquo; available, price competition is often nonexistent, and customers are rarely price conscious, therefore everyone thrives. In an upturn, salaries are increasing and employees also see stock options and perks as important parts of the package. For the companies with less than stellar business models and margins, a downturn will mean that they will face increasing competition. This means lower margins, higher customer&a;nbsp;&l;span&g;&l;/span&g;acquisition cost and the risk of losing key employees when perks disappear and stock options lose value.&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;I recently listened to the founder/CEO of a startup that had only raised a small seed round&l;span&g;,&a;nbsp;&l;/span&g;&l;span&g;&l;/span&g;&l;span&g;but was &l;/span&g;now&a;nbsp;&l;span&g;seeing &l;/span&g;good growth and being profitable, &q;we call this smart growth&a;rdquo; he said. I double-checked with experts and they call it &a;ldquo;standard business practice.&a;rdquo;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span class=&q;None&q;&g;&l;b&g;&l;span&g;Fifth&l;/span&g;&l;span&g;, &l;/span&g;&l;/b&g;&l;/span&g;the explosion of networking events, meet-ups, incubators, maker spaces and conferences with vague or no specific focus. I love networking and being inspired by innovators and thinkers, preferably outside of my own comfort zone, but often today many meetings and spaces are nothing but brand building efforts to benefit the organizer. This means that the actual value for an attendant is very hard to measure. Recently I met with one entrepreneur that had come to the conclusion that it is a better idea to attend industry specific conferences with the aim of meeting potential customers than networking with other entrepreneurs looking for the next round of funding. How revolutionizing!&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;Having visited close to a dozen startup environments in Asia, the Middle East, Europe and the Americas in the last year, I am very impressed by the energy and curiosity on display. At the same time I have come to the realization that all these environments are equally unique, since you see the same fintech, mobile AI and gaming ideas everywhere. &l;span class=&q;None&q;&g;&l;span&g;&l;/span&g;&l;/span&g;&l;/p&g;
&l;p class=&q;Body&q; align=&q;left&q;&g;&l;span class=&q;None&q;&g;&l;b&g;&l;span&g;One more thing. &l;/span&g;&l;/b&g;&l;/span&g;It&s;s natural that markets go up and down, and we can all state the obvious and talk about the emperor&a;rsquo;s new clothes from time to time. That said, we live in a very interesting time. Technology will redefine society and the way we do business, and I am convinced that there are lots of long-term opportunities for entrepreneurs and investors in this ongoing &l;span&g;tech&l;/span&g;&l;span&g;&l;/span&g;storm.&l;span class=&q;None&q;&g;&l;span&g;&a;nbsp;&l;/span&g;&l;/span&g;&l;/p&g;
&l;hr&g;&l;p class=&q;Body&q; align=&q;left&q;&g;&l;em&g;&l;span class=&q;None&q;&g;Nicklas Bergman&a;nbsp;&l;/span&g;&l;span class=&q;None&q;&g;(&l;/span&g;&l;span class=&q;Hyperlink1&q;&g;&l;a href=&q;http://www.twitter.com/ncklsbrgmn&q; target=&q;_blank&q;&g;@ncklsbrgmn&l;/a&g;&l;/span&g;&l;span class=&q;None&q;&g;)&a;nbsp;&l;/span&g;&l;span class=&q;None&q;&g;is an entrepreneur and technology investor who during the past 20+ years has been responsible for epic failures and lucky enough to be part of a couple of successes along the way. Loves skiing, new media art and struggles with the &l;/span&g;&l;span class=&q;None&q;&g;fact&a;nbsp;&l;/span&g;&l;span class=&q;None&q;&g;that &a;rdquo;everything is interesting at the same time.&a;rdquo;&l;/span&g;&l;/em&g;&l;/p&g;
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