In my role as the CEO of Growthink, I get asked variants of the same questions a lot, namely: "What do you think about this economy?” “Do you see things turning around?” “Are there any deals getting done out there?” I answer these questions based on a number of factors:
- How is the Dow Jones Doing? While the performance of the index of the 30 biggest industrial companies is no way near as indicative of the health of the U.S. economy as is popularly imagined, it has enormous psychological importance. While still massively off its highs, the trickle-down benefits of the market moving to its current 8,300 level from its March 9th low of 6,440 (an uptick of 29%) cannot be overstated. If we can see the rally continue to the 10,000 level by the end-of-the-year, we can declare this recession officially over.
- How is Consumer Confidence? The Conference Board’s Consumer Confidence Index this month jumped to an 8-month high in May, spiking from a 40.8 level in April to 54.9. The index had hits its lowest level in February (25.3) since tracking began in 1967. As Lynn Franco, the Conference Board's research director, said "While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us.”
- What is The Level of Venture Capital Funding Activity? Venture capital funding activity in the 1st quarter of 2009 hit its lowest level since 1997, with venture capitalists investing just $3.0 billion in 549 deals (National Venture Capital Funding Association). Signs are very strong that the 2nd quarter will be appreciably better, with the buzz created by the $10 billion valuation on a $200 million investment in Facebook by a Russian investment firm adding significant buoyancy to the overall emerging technology company arena.
- How is the IPO Market Trending? The successful IPOs of venture capital-backed companies OpenTable, the online restaurant reservation service, and SolarWinds, a network software company are contributing long-awaited liquidity and bull market sentiment to the long-suffering IPO market. Big valuations and big money being made by early investors in deals like this is what angel and venture capital investing are all about – so see more IPOs like these coming down the pike in the near future (Twitter and LinkedIn, anyone?)
- How is Growthink Doing? Because as a firm we touch so many entrepreneurs and angel investors every day, our business and investment activity has historically been a very good leading indicator of overall economic activity and equity investment performance. And after going through the most challenging 6 months in the history of the company from September through March, business has picked up significantly. May 2009 already has been Growthink's best revenue month since last summer, and our deal pipeline is right now the strongest it has been since late 2007.
What does this all sum up to? The Beatles say it much better than I ever could:
Little darling, it's been a long cold lonely winter
Little darling, it feels like years since it's been here
Here comes the sun, here comes the sun
and I say it's all right