Business Insight Zone

The New York-based venture capitalist offers his thoughts in the context of the Internet-business downturn he sees as inevitable. (He’s smart enough to also note that he can’t predict the future, and that he might be wrong about a downturn.) But what he says applies across the board:

Do we have to go through a shakeout to get to the next big move? I don’t know. I only know that’s what it took last time.

So if you see the downturn coming as the entrepreneur I met with clearly does, what do you do? If you are a VC, I think you keep investing, but carefully. Its not a time to step on the gas. And focus on your existing portfolio, take gains where you can take them, and make sure you’ve got plenty of ‘dry powder’ for your portfolio.

This is the sensible view of someone who’s been around the block and seen how business works — not just at the macro scale, but up close and personal — through more than one major economic cycle. It’s also a viewpoint worth keeping in mind to leaven the woe-is-me exclamations coming from some parts of the financial world, the real estate market, and so on. Financial grown-ups keep dry powder (it’s also called “cash”) in ready supply for the down times. This applies equally to households and businesses, and it doesn’t matter if the entities in question are rich or not.

Give Fred’s post a read — it’s worth your time.