Nothing to fear…

True entrepreneurs should actually feel energised by this downturn – the snake oil salesmen are on un-paid leave… enjoy some clear water while it lasts. DORON BEN-MEIR

By Doron Ben-Meir

For the first time since the tech-wreck for some of us, and almost 20 years for the rest of us, we are being reminded that, in the end, if you don’t create something of tangible value to a real customer – there is no value.

The majority of those suffering the greatest losses at the moment are those that invested in passive assets and, moreover, borrowed someone else’s money to do so. Cognisant or oblivious, they were speculating on the impossibility of valuations continuing to escalate in the absence of real value creation.

The most despicable actors in the play (many of our brand name banks) manufactured investment products of dubious quality, leveraged their reputations to sell them, and now extend their hands for taxpayers’ assistance when – heaven forbid – the rest of us finally realise that the emperor has no clothes.

Then there are our friends the economists, analysts, financial commentators and advisers. It is remarkable how accurately they can articulate what happened yesterday.

Between the multi-million dollar bonuses and the high salaries of our chattering commentator classes it is staggering to think of the amount of money spent on self-serving advice and retrospective analysis as we all witness an historic avalanche of asset values.

It is naïve to think that people have really learnt their lesson – I’m sure there will be future booms and busts because it is, after all, simply a reflection of basic human nature.

As an investor, I find the current financial crisis annoying to say the least… but as an entrepreneur, the prospect of a severe economic downturn triggers a walk down memory lane…

I started my first business in 1991, right in the middle of the “recession we had to have” – thank you Mr Keating. At the time I was totally focused on my business opportunity. The state of financial markets could not have been further from my mind – mainly because I had no money anyway, so what difference would it have made!

It took me two years of hard work to get to the starting line. It was not a business that would have interested venture capitalists (granted at the time I didn’t know what a venture capitalist was) but it was a business I believed in and fought hard to realise.

Truth is that it could have gone either way in the end, and no doubt a bit of luck came my way, but that recession coincided with one of the highlights of my professional life.

Yes, it’s true that a lot of innocent people get hurt when markets turn, and that is the real tragedy; but for all my fellow entrepreneurs, if you have a value proposition that delivers real value to a customer, and you are prepared to work really hard to realise that value, there is nothing to fear in a downturn.

Indeed in some ways it is a time to rejoice because the snake oil salesmen are on un-paid leave… enjoy some clear water while it lasts.

Doron Ben-Meir has been an active venture capital manager for the last eight years. He founded Prescient Venture Capital and prior to that was a consulting investment director of Momentum Funds Management. He was a serial entrepreneur over a 12 year period, co-founding five new technology based businesses.