Bits: What a Hiccup in Start-Up Land Might Look Like

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Tuesday, August 25, 2015
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What a Hiccup in Start-Up Land Might Look Like | Another day, another sell-off in the global markets. Concerns about China’s economic slowdown and a souring view of emerging economies dominated again on Monday. And like last week, tech stocks were not immune from the market’s plunge.

Perhaps this is the upside: It could have been worse.
When the markets first opened on Monday, even Apple – the most valuable company in the world by market capitalization – was down about 10 percent. But an email from Tim Cook, the company’s chief executive, hailing the company’s sales in China help pushed the stock higher, at one point back to positive territory. Eventually, the shine of the email wore off and Apple shares ended down 2.5 percent. On a day immediately named “Black Monday” by local commentators in China, where the markets were hit particularly hard, falling 2.5 percent didn’t seem bad at all.
Companies the size of Apple have some tools at their disposal to combat a down market. Start-ups are a little less equipped. Yet as Katie Benner writes, any adverse effect on venture-backed companies from the market downturn is likely to be uneven and more complicated than a straight bust.
The ripples of the change could move slowly. Well-run companies with achievable business plans (and plenty of cash) could survive and even thrive for some time. The weaker companies, those burning quickly through their stockpile of investor money, could find it hard to replenish that money.
In other words, if the market doesn’t start to turn around soon, all the giant fund-raising rounds may be in limbo – as well as the life of some of today’s start-ups.
Bill Gurley, a prominent venture capitalist:

Hot Tech Start-Ups May Face a Long and Bumpy Fall | The worldwide market gyrations will filter down to Silicon Valley, with start-ups that need cash likely to be the first to undergo tougher scrutiny.

Gregory Blank, a financial adviser at Blank Financial, has taken about 20 calls from anxious clients unsure whether to sell or buy.

Advisers Work to Calm Fearful Investors | On some days, market psychology can count for more than long-term fundamentals, pushing panicked investors to sell.

Timothy D. Cook, Apple's chief executive, during a trip to China in May.

Apple Stock Reacts After Tim Cook Email Praises China Sales | The chief executive of Apple said business was booming in China, where the company has long laid the groundwork to reap big sales.


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