- Charles Dickens, from A Tale of Two Cities
During 2001 to 2002 and from 2009 to 2010, few job seekers evaluating startup companies would take a job at a company that was burning cash at rates of $4 million a month. Gurley is concerned that “today, everyone does it without thinking.” There is no fear out there, even though the warning signs are all over the place. Silicon Valley is milking the low interest rate environment for the very low cost of capital. “If the environment were to change dramatically,” Gurley says, “the types of gymnastics that it would require companies to readjust their spend is massive. So I worry about it constantly.”
At base is the principle that cash flow underpins a company’s value. Without that, many companies unable to generate cash will put themselves at risk; especially those small startups with high cash burn rates.
Capital markets are kind right now, but that can change in a year. Look at what happened to the telecom market segment in 2001, when first Lucent, then Nortel, and finally Cisco missed their earnings calls and collectively scrambled to find cash and slash jobs to curb spending. Gurley believes that difficult business lesson could repeat itself today.
Gurley adds, “I’ve come to believe that bad business behavior is coincidental with the best of times in our field . . . the crazier things get, the worse people execute.” Prior to the combined dot.com and telecom busts, it was indeed the best of times until greed and poor execution made it the worst of times for the telecom sector.
 BLOG inspired by: Investor: Silicon Valley Partying Like It’s 1999, Yoree Koh and Rolfe Winkler, Wall Street Journal, September 15, 2014, p.B1
 In my March 2015 BLOG, the Fed weighed in on our current "best of times:"