Jeremy Au and Jeraldine Phneah joined Chill with TFC to talk about the cyclical tech winter and how employees, investors, and founders can ride out this season of scarcity.
Check out the podcast here and the transcript below.
[00:00:00] Reggie Koh:
Welcome back to the Financial Coconut Podcast Network, the leading personal finance podcast network in Singapore. I'm your host Reggie, a.k.a. your chief financial coconut, and every Thursday you will finally get to chill with us hosted by Andrew. We will be bringing on some of the quirkiest, geekiest leading voices in the personal finance space to give them ample time to talk about their stories, the lessons they've learned over time, and some good advice for all of us. What has aged well, and what didn't do so well? Why did they do what they do? So sit back and chill with TFC.
[00:00:34] Jeremy Au:
I think there's this dynamic where a lot of grasshopper startups that unfortunately were kind of overbuilt for assuming a high capital liquidity environment.
So I think at the end of the day, is tech winter here? Yes. Is it gonna happen again? Yes. Because it's happened before. And is it good or bad? And it says, depends on whether you're a grasshopper on end.
[00:00:59] Andrew Zhan:
Hello and welcome to Chill with TFC, a show where we hang out and chill with the geekiest and quirkiest minds to explore how they think about money and life. On today's show, we have two familiar guests, Jeraldine and Jeremy, to talk about the upcoming tech winter. You hear about the layoffs, profitability is going down and times are tough.
So how do we prepare for this tech winter? And this will be relevant be it whether you are an investor, an existing employee, or just looking to get into the tech space.
We're talking about how you two met.
[00:01:29] Jeremy Au:
Yeah. Well, long story short, we met because we were students studying at Orchard Library, and I was in NS, studying for my SATs. And I think that, I can't remember what you were doing.
[00:01:40] Jeraldine Phneah:
Studying for all levels.
[00:01:42] Jeremy Au:
Yeah. Right. Yeah.
[00:01:42] Andrew Zhan:
Jeraldine, you just randomly met at a library.
[00:01:46] Jeraldine Phneah:
Yeah. So we met at the library.
[00:01:47] Andrew Zhan:
And became friends after that?
[00:01:48] Jeraldine Phneah:
Correct.
[00:01:50] Andrew Zhan:
And both are now in the tech industry, right?
[00:01:52] Jeraldine Phneah:
Yeah.
[00:01:52] Jeremy Au:
Yeah. Time flies. I was like, "Oh, I don't know how to do math." But now I'm like, "Oh."
[00:01:57] Andrew Zhan:
And now running businesses, helping people run businesses.
[00:02:01] Jeremy Au:
Well, hopefully, I know math better now.
[00:02:03] Andrew Zhan:
Hopefully. You should. You should.
[00:02:05] Jeremy Au:
I should.
[00:02:05] Andrew Zhan:
As a VC.
[00:02:06] Jeremy Au:
That's what you think?
[00:02:07] Andrew Zhan:
Cause actually, VCs might just be good at picking companies, right? You need not do the actual math yourself.
[00:02:12] Jeremy Au:
Yeah, we have to do math. This is a math. Yeah.
[00:02:14] Andrew Zhan:
Okay. Evaluations and all that.
[00:02:15] Jeremy Au:
Yeah, exactly.
[00:02:16] Andrew Zhan:
Jeremy has been on a show relatively recently, so you can check out his episode Should you Invest in your Friends and family's businesses? Well, both are repeat guests.
[00:02:24] Jeremy Au:
Right.
[00:02:25] Andrew Zhan:
In between now and the last time Jeraldine was on a show. You changed jobs?
[00:02:29] Jeraldine Phneah:
Yes, I changed jobs.
[00:02:30] Andrew Zhan:
Tell us about that.
[00:02:31] Jeraldine Phneah:
So previously, when I was here, I was still at Sales. No, I was at Workato. So right now I'm doing something different. So I'm looking after the commercial business at an Israeli tech startup called Spot, so it's recently acquired by an American MNC. Basically what we do is that we help customers with cloud optimization.
[00:02:49] Andrew Zhan:
Okay. You don't wanna sell to me, right? Just, okay. Just again, enough information.
[00:02:54] Jeremy Au:
Download the materials at bit.ly slash 1 2 3.
[00:02:58] Jeraldine Phneah:
No. Which is actually very relevant during this time, right? Because a lot of companies are actually thinking about how can we improve our unique economics, how can we grow faster? How can we be more productive? And basically what Spot does is really optimizing and also automating the infrastructure management, which fits exactly into all these three objectives, right?
[00:03:13] Andrew Zhan:
We need your perspective, because we're gonna talk about the tech industry today. And well, if you've seen Jeraldine's IG stories, she's been talking about a tech winter. So I'm gonna ask both of you. Is a tech winter coming?
And a bit of background about that, right? Because, first of all, how would you define a tech winter? Jeraldine, why don't you take it first?
[00:03:47] Jeraldine Phneah:
I guess when we look, everybody's talking about tech winter these days, right? And if we look at last year, all these companies, they were basically hiring like crazy, right?
[00:03:55] Andrew Zhan:
Right.
[00:03:55] Jeraldine Phneah:
Spending a lot, going on both parties and all that. But right now, this year, the approach seems to be more conservative. So what does this mean? It means that they are really more focused on like unit economics. So when we look at the news, we will see companies
[00:04:08] Andrew Zhan:
Help us understand unit economics.
[00:04:10] Jeraldine Phneah:
Bending prudently and being more efficient in the way they operate the company. Okay. So if we look at the news, we will see stories of like layoffs. I think every other, or every week I get a story of some company, be it big tech or like startups, talking about how employees are being let go and everything, and how they really need to double down focus.
And for those who are not laying off yet, or not laying off, they're basically issuing press releases about how they're gonna be profitable soon. So that this whole talk about pathway to profitability, stretching your dollar, becoming more, sustainable and all, that's the whole shift and focus.
And last year, I think Jeremy and I were having this conversation. I asked him, what do you care about? He said, growth, I only care about growth. But this year, suddenly, you get, do you remember?
[00:04:55] Jeremy Au:
Yeah.
[00:04:55] Jeraldine Phneah:
Yeah. And then this year, like there's a lot of more focus on profitable, sustainable, profitable and everything.
[00:05:02] Andrew Zhan:
Yeah. Okay. So what do you think, a tech winter is coming?
[00:05:04] Jeremy Au:
You know, I think the thing about winter is they conspire every year, right? Because it's part of the seasons, and I think what we mean by that is this is not the first tech winter. That has happened before, right? I mean, we've heard from dot-com boom. We actually had quite a lot of dynamics that happened and we see that in China and tech as well that was happening over the past few years. So I think the question is just like there's always boom and it's bus cycles in every vertical, right? We see that in oil and gas, we see that in commodities. And the truth is that we see that in technology as well.
And part of it is really linked to not just, of course, technology but also I think fundamentally how much VC society value technology and the promise of future profits down the road, versus other investment opportunities. And that's actually very linked to interest rates that are across the board. And so, for those who are in the know, I think we've been in an environment of low-interest rates for a good chunk of time. I mean, the US Fed printed so much money over the past few years versus what they've historically printed. To put it in context, over a hundred years they printed about a trillion dollars of capital.
And then over the past 10 years they effectively printed 6 trillion, right? So just kind of thing about it, it's like you deliver six X amount print. But then you do that also in a fraction of the time as well. And so all of that generated obviously a lot of asset inflation across the world, but it also created very low-interest rates.
And what low rates mean is that a lot of the projects and products that provide some level of return are fundamentally no longer attractive because of low interest rates. But then, something like technology where you have a future return and as a result, normally subject to a lot of discounting, rate versus the interest rate.
Fundamentally, it becomes much more compelling. I think low-interest environment made technology be very, very compelling. And so a lot of capital when they're seeking for higher return in a low-interest rate environment or negative interest rate environment, basically there was a huge shift that happened with the recent inflation spike due to the global crisis.
Obviously in Europe, in energy and so, so forth, the unwinding of the China-US trade relationship, de-globalization. And so all those things basically means interest rates are going up. To control that, investment opportunities are more compelling now versus technology, and so capital is being pulled out of the system.That would be great, you know, because I make you sound very financial, which I think is for the audience here. But I think where I think the pain really creeps in is basically what happens when companies that were built for summer, the star of the ants and the grasshoppers right?
The grasshopper plays all day during summer and then freezes and dies in winter. But the ant that was working very hard in summer, survives, the winter. And I think there's this dynamic where a lot of grasshopper startups, unfortunately, were kind of overbuilt for assuming a high capital liquidity environment, unfortunately, are now going through some tough decisions about doing layoffs and restructuring themselves.
Whereas, I think some founders who saw this coming or were more conservative and I've met a lot of them, are normally doing well, but gonna do better during this downturn. So I think at the end of the day, is tech winter here? Yes. Is it gonna happen again? Yes. Because it's happened before. And is it good or bad? And it says, well, depends on whether you're a grasshopper or an ant.
[00:08:15] Andrew Zhan:
Okay. Yeah, I mean, you mentioned low-interest rates. Those were good times. Good times. And Jeraldine also pointed out now companies are more focused on sustainability. So do you think there's a shift from profitability? You know, last time it was growth and now it's shifting towards profitability, you know, actually making money, VCs being more prudent in where they invest.
[00:08:35] Well, the background of this is that last time you look at growth, right? Jeremy, you were saying that you, you only look at growth. The classic example that we all can relate to will be Uber. They're losing money per trip back then. To acquire customers, capture the market, conquer the market, whatever you call it. And that's okay because growth was the main focus back then. But now are we looking more at, you know, are you making money or not?
[00:08:55] Jeremy Au:
The reality is VCs are still looking for growth because what that means is if you look at all the different categories, you can put money in stocks, you can put cash. You can put it in bonds, you can put it in real estate. And I think the mandate for venture capital is still to invest in technology that's growing very fast. The question is how fast is that growth? Right? And I think that when there was a low-interest rate and there was low liquidity in the venture capital markets, that was as big assumption that there'll be more capital for a company to figure out growth a lot, and then be able to count on other VC capital to come in to support them when they become profitable later as well. And I think what's happened is that bar or trash orders, yeah, you still need to grow quickly and you should also have demonstrated that your unit economics at a fundamental level are working.
And the truth is, I think all of the sober VCs who have seen this story play out honestly over the past two decades. They still remember the dot-com crash and all these other things. So I think we've always still been there. We've always been looking for high growth and strong unit economics. However, I think there were a lot of venture capitalists, unfortunately who were also part of the party and they were willing to bid up, and invest in companies that showed that high growth or even higher growth without any evidence of that unit economics.
And so the combination of these two groups of capital has created this tech boom that we've seen over the years, but now, I think parties signing the wind-down and so people are sobering up and I think, , there's that reversion where newer investors are starting to say, oh, they're kind of relearning what we already relearned multiple times in the tech winters that we've seen around the world, which is that the time horizon for a startup is at least 10 years, maybe even 15 years these days.
There's definitely going to be a bus cycle within those 10, 15 years and I think people forget that all the time. It's a long time to build a company and you know, the super cycles are between seven to every 10 years. There's always gonna be a recession and there's always gonna be a boom cycle. So how do you have that economy as a founder, and how do you have the economy as a board member, and how do you have that economy as a VC to be disciplined during good times and to be aggressive during bad times? And that's the start of the ant, right? Which is you can be aggressive during winter because you start up during summer. And I think that's really that whole life cycle that I think everybody has been thoughtful about.
[00:11:24]Andrew Zhan: Jeraldine, of the companies you've worked at or worked for, like you have examples of them being ends, how did they prepare during summer to prepare for winter?
[00:11:27] Jeraldine Phneah:
So I speak with many different companies out there. I think that it's really more about being responsive to change as well, right? So in one of the companies that I spoke with, I think it was as early as in February, they already sent out like, they already presented in their All Hands like, hey, interest rates are increasing, it's gonna be harder to raise our next round. What we need to do now is be more double down on growing, but at the same time be more focused on like saving costs. So some of the things that I've seen in recent months would be like cutting down travel expenses. So I think for many companies if you work in tech, you can basically fly SIA everywhere, but now it's like, please take school if it's nearby. Also, like other things that I'm seeing will be encouraging people to prudent about all the other like parties and stuff like that, that they often organize during the, the good times, the summer times. Yeah.
[00:12:14] Andrew Zhan:
Yeah. They're quick to read and I'm also reading reports about companies freezing hiring or in the US I'm reading reports about getting those work from home employees to come back to the office and if you don't, please do what you will, which is to leave the company. Right? It's kind of a natural attrition going on there. So when you talk about winter, we give the macro picture and give some numbers you mentioned like this. Of course, finances is good for audience, but on the ground, if you know employment looks bad, then there's something to to worry about.
But interestingly, because even if I look at reports, right? Let's take Singapore for example, cause I just saw this yesterday. Q2 employment is generally, employment is going back to near pre-pandemic levels. And of course, in the US, whenever we talk about the recession, they're always bringing out this counterpoint of, oh, but employment data looks good. And of course, this is looking at employment data generally. And of course, it's looking at all data looking backward. Right? So looking forwards, you're saying that there is a winter, we should definitely be prepared for it and that employment data might be bad, there might be layoffs coming, right? Do you see that Jeraldine?
[00:13:13] Jeraldine Phneah:
Basically your question is really more about do I see employment like dropping?
[00:13:17] Andrew Zhan:
So if you look at employment, cause we look a bit, talk a bit about profitability. But let's look at the employment.
[00:13:21] Jeraldine Phneah:
So I cannot speak for the other industries cause I do not.
[00:13:24] Andrew Zhan:
Yeah. We're looking at tech specifically for this session.
[00:13:26] Jeraldine Phneah: So if companies are not able to reach their next round and then if they are not being like prudent about expenses and they're not growing as fast as they want, definitely we will see employees from these companies being laid off, or maybe having their salary cuts and things like that.
[00:13:44] Andrew Zhan:
How are they managing profitability and all these layoffs? Like what kind of jobs are being lost right now?
[00:13:49] Jeraldine Phneah:
I cannot say for sure, like what is the main type of jobs, but what I'm observing is mainly recruitment jobs. Because last year there were a lot of like tech recruiters being hired, right? To snatch and fight for tech talent. But one of the jobs that I see being impacted is actually recruiters, cause if the company is not like hiring aggressively anymore, what is the reason for having some of these recruiters? So that's why a lot of them are being let go. Other roles that I see impacted generally, I'm saying generally cuz every company is different, right? It's the ones that are not connected to revenue or product. These are the two areas being seen.
[00:14:20] Andrew Zhan:
Is that what you see, Jeremy?
[00:14:22] Jeremy Au:
I think that's really spot on. Exactly like if you were built for high growth in terms of revenue, and therefore you said to yourself, I need to have a high hit con growth, then when you decelerate a link, less recruiters is one. And I think the other way to think about it is that, if you put yourself in this, in the seat of the executive team, right? You're looking to strengthen your unique economics, your revenue model. So that means it's important for you to keep your top performing sales reps, your marketers who are quantitative or able to prove that they are cost-effective. Channels are really important. And obviously, product because you're still looking to get out of your product depth or the coming of your engineering depth, or you have to build new features to sell new customers. So I think really spot on there.
What that means then is, from an individual perspective is, are you material to the company? At a deep level, am I nice to have, or am I a must-have from that new environment? I think people would be very thoughtful about their job scope. And if that means that you're in Finance or you are in other parts of the company, I think the challenge is how do you make sure that you continue to articulate to your manager, your supervisor, leadership team about why your role is important, but also you continuing to evolve your role to be more focused on that. So for example, you're in the finance team, can you kind of like raise your hand and say, hey, I'm willing to be part of the cost-cutting?
Or you know, like workforce, proactively work on that. For example, if you are recruitment and kind of like, hey, how can we proactively put together a budget that's much more conservative, but also allow us to keep our head count. We will, you know, we in-house some of those functions and use less consultants outside, so we preserve our jobs in that sense. But then, we let go of the consultants that were previously helping us with that function as well.
[00:16:10] Andrew Zhan:
So actually asking myself, am I directly contributing to the bottom line of the company.
[00:16:15] Jeremy Au:
Yeah. Or how can I improve my scope so that I'm part of that?
[00:16:18] Andrew Zhan:
Yeah. Right. And of course you can argue that every job has its function, but you know, when push comes to shove and companies are forced to like cut on cost, it could be let go. Yeah.
[00:16:26] Jeraldine Phneah:
Yeah. Actually that Jeremy, while you are actually talking, I have a question. Can I ask questions?
[00:16:30] Andrew Zhan:
Ask Jeremy.
[00:16:30] Jeraldine Phneah:
Right. So like, for most of the attrition and all, layoffs and everything. I see that happening to tech companies. But I'm not sure are they happening also in the VC side. And the reason why I ask this question is because on one hand you have a lot of like what we call dry powder, like in Southeast Asia now, I think many people set up their own like Southeast Asian funds. You know, talk about Insignia, ACS, a lot of like money that is coming to this region. But at the same time, like investments are taking longer and then there's less volume also of investments. So what is your take on it, do you think that your thesis will be impacted also.
[00:17:05] Jeremy Au:
For the thousands of people in the region who may be exploring a venture capital job, not the millions.
[00:17:12] Jeraldine Phneah:
Yeah, of course. I asked him, how does one become a VC? And the first answer he gave me, I'll re rephrase that. Basically have a lot of money. That's number one. That's the easiest way to be. Yeah. You can be a complete idiot, but as long as you have money. people are gonna come to you. But of course the next answer he gave us, we can start working for a VC firm. Yeah. Start learning experience that courses you can take up. Yeah.
[00:17:31] Jeremy Au:
Yeah. I think the reality is that, again, venture capital is a marathon, right? Not a sprint. And so the capital cycle is over, every fund is like basically a decade, right? You know, generally the teams at the senior and middle level are relatively stable because they have that understanding that it's such a long journey. And I think where I think some of the shift may be would be on the junior level, would be like, yeah, are there as many openings there are for entry level venture capital, , analysts to join the team? The answer is probably, probably less. And the reason why is because, , any existing funds will continue to be, moderate and thoughtful about their deal flow activity and efficiencies and so, so forth, which is not a problem. And I think that new funds that were thinking they're gonna raise a lot of capital or that we're able to deploy, but unfortunately we're caught out and underperforming versus their requirements, we will have less jobs as a result. So I think it's not really an issue at the middle and senior levels, but I think at the junior levels, there'll be less openings than they were a year ago.
[00:18:41] Andrew Zhan:
Okay. So we got to position ourselves, right? So Jeraldine, what are you doing to position yourself in this environment?
[00:18:47] Jeraldine Phneah:
So from an employee's perspective, yeah. This is a finance podcast, so basics apply, right? Have an emergency fund. And then when you're thinking about making big purchases, for example, property, it's good to be more conservative and think from the perspective of like, hey, what happens if six months time I don't have my job and I'm gonna be unemployed for maybe six months, so can I actually fund my mortgage and all? So these are questions, hard questions to really ask yourself on an individual level. And I think that this is also the best time to actually because if you don't stay competitive, you don't improve yourself, you don't keep up with the trends and obscure yourself right? Then it's really, you're putting yourself at a risk of being left behind. Yeah. So these are the two things that I'm actually doing, really just being conservative about expenses, and at the same time also doubling down on my own learning. Other aspect people don't think about, but I think should be given more attention to is actually networking, because that will actually serve as a safety net for yourself, right?
If in the instance you get let go or something, because what I'm seeing right now is that, I'm in various tech WhatsApp groups, right? And then people are sending like Google documents or Google Sheets about like, hey, these are all the impacted people, let's help them. And then coming together to support each other. So immersing yourself in this kind of communities, getting to more people, that's absolutely critical as well.
[00:20:01] Andrew Zhan:
Now first learning and making yourself, improving yourself as an employee. Right. Your skillset and everything. So, Jeremy, as a VC, do have advice for startup founders when they do recruitment? Like what kind of employees should they be looking out for? And I'm asking this question so that those who want to prepare themselves for tech winter, make themselves more valuable as employees, right? They can know how can they improve in becoming a better employee?
[00:20:22] Jeremy Au:
I think when it comes to recruitment, I think everybody knows the basics, right? Which is, want someone who's able to perform the job description and do it well, and then work well for the team. What I found is that, it's less about the criteria and more about the standards that you hold yourself and the recruitment team as a whole. What we mean by that is that there often may be a case where this person is good enough, right?
And the question is, is that good enough, as a team to buy this person? Because that's something that would've been easier to swing for during the good times, but during these tougher times, I think the threshold is higher to be like, yes, this person is definitely gonna knock it out of the park, right? Which is a higher threshold. And so founders and executive teams and hiring managers should really hold themselves to a higher bar, and if they're unable to come to the conclusion, really consider how they can test for it deeper, right? So could they use a case study? Could they provide an opportunity to work on site for a week? Alright. Have a probation period for three months. These are things that were tougher, frankly, to implement during pro-employee time period, during the tech summer. But during the tech winter, I think that for the right talent it would really let you and the team get much better conviction to be like, okay, this person is definitely knocking off the park. And I think that lets everybody be happier, right? Which is, I think the employee knows that they have a better chance, better future of the company. The company feels that they have a stronger foundation for the unit economics and therefore their overall revenue and profitability goals.
So I think at the end of the day, you know, a job is always mutual match between two sides. Is this a good company for the employee and is a good employee for the company? And I think that's something that now has a higher threshold for everybody.
[00:22:15] Andrew Zhan:
So it could be that if you are a B player, that used to be relatively okay, you're, you're safe generally, but now it could not be that safe anymore if you are not really one of the A players within the company.
[00:22:26] Jeremy Au:
Yeah. I mean, I think that in the past there was this thing which is like, let's definitely hire A players. If we hire a B player, let's give this person a shot or let's hopefully coach them to get to an A player. And I think that's not the best mindset. I think I normally share people's, like, you want people who are A players or could be A players. And I think this is a bit of a fine distinction, which is saying this person's a B player versus someone who could be an A player. But those are actually very different dynamics. Right? Which is, do you see the coachability, do you see the humility? Do you see the self-awareness that lets them have that future. And I think that that's the difference between those two categories.
[00:23:03] Andrew Zhan:
Jeraldine, you wanna react to that?
[00:23:04] Jeraldine Phneah:
When Jeremy was describing all this, right? What I was thinking about was that actually for companies, startups, it's actually a great time to actually hire. So last year, you know, a lot of competition for good candidates, right? But this year there is less competition, right? Because sometimes, , good candidates may, as a result of company's decision, be released back into the job market and everything. So it's a good time for companies to hire and you can actually pick up some of these, like talent you might not have access to like the previous years.
[00:23:33] Andrew Zhan:
So how do you think this tech winter will play? And I know we're playing prediction games here, right? But let's talk about how long do you think it will last or what are the factors, what are variables that will cause it to shift and all that? How far do you see this? Q4? Q1? How would this tech winter play out? I'll ask Jeraldine too. Jeremy, go for it.
[00:23:48] Jeremy Au:
You know, fundamentally a big part of it, again, goes back to interest rates, which is linked to inflation. So as long as the Fed is increasing interest rates or keeping interest rates high, the awkward reality is that putting money in your savings account is better than you know so, so forth. The hurdle rate is higher for VC and any kind of project and so, to some extent we're actually making macroeconomic predictions of all costs, right? Do we believe, do we believe no? Do we believe what the Fed is doing? But also, do we believe that the factors that driving global inflation, when is that gonna play out? Right? And I think the truth is, I think in the short term, I think energy and the Europe crisis, unfortunately, is gonna play out at least till the end of the year before there's any resolution. And so I think energy would be a problem in terms of inflation. I think that the unwinding between deglobalization and fragmentation of supply chains is a more serious concern in a medium term.
And so, you know, I would say, period of high interest rates will last at least till Q1 next year. And so as a result, I don't see any shift, I think from a technology perspective, in the sense that I think there'll be a deepening of this tech winter, at least till Q1 at minimum.
How long will take to recover again, will also depend. That being said, the job of technology is that, there's so much creative destruction, and there's so much renewal all the time. And I think in the harshest of this winters, I think there will still be great founders and I've met them who are still crushing it, still growing, still being thoughtful about business, and I think we will, they will still be able to raise large venture capital rounds in Q1, , next year, for example. If you weren't prepared for the winter, you can't count on winter going away. But for those that have been able to build, I think there will be good stories in Q1. And so I think there'll be a lot of stories in Q1 to be like, is tech winter over? Right? Yeah. Because all these people raise lots of money and you're like, yeah. Because you know, it's like green shoots, like the seeds and the spring is coming and spring is here and it's still cold. , you know, AF during spring. But, you know, I think the best teams will still be pushing forward.
[00:25:53] Jeraldine Phneah:
To add on to that. Well, I see like the boom times was actually like, rising tightly, all boats, right? So it's very hard to separate the good and great and not good companies. But what is happening now is that we're starting to see like, hey, who are the actual winners, right? Who are people who are really like performing well and running this business? Well who can execute versus those who can't, and were just like cowboying their way through.
So to address that, that part about like how long I think this will last. I'm not very good at making like forecasts, I guess. What I've seen is that on average, what we call like down cycles will last about 15 months. So this is statistics. And what I've been hearing from VCs who have been posting on Twitter is that, they're telling founders to prepare for two years or even three years runway, right? So I guess that this is probably how long it might last.
[00:26:42] Andrew Zhan:
So I think winter could be long longer than you imagined, right? So I wanna ask questions for those who are interested in investing in tech. So what do you think? Is it a good time to invest in tech stocks or wait and see? Wait till we get more clarity on an inflation and interest rates environment? Jeremy?
[00:26:57] Jeremy Au:
It's a good time to invest in early-stage tech. So private markets, because all the founders who now are being asked to raise two to three years, they're willing to, I think, be thoughtful about the price, about what's a fair price versus the experiments and milestones that haven't been de-risked in their growth journey to become an exit and be a unicorn. And so, I think this is a good time for a private market, in venture capital, technology investments. And if you are super early stage as like pre-revenue or pre-product market fit, then this is, you know, the best teams will still be built, be founded today from the people who have been terminated, the people who have explored new opportunities, from the people who have realized that their last company didn't really make sense, but now they wanted to pivot and do something else.
I think this was still great things that will still happen, you know, public technology companies, again, you know, it is cyclical, right? And so the truth is, and I think we may be near the bottom or at the bottom in terms of technology stocks, but it may still take a long time for it to hit the peaks that we saw, because again, 2021 was a function of so much capital liquidity flowing into that piece. So it benefited from both a stock market, bull market and the allocation from high interest to a low interest rate environment, so that confluence of factors may not come as easily as the next five years, for example. So I think the fundamental thing is there's probably really good deals as well on the public markets on tech, but I think, again, you can't do an index, I think at this point of time easily.
[00:28:34] Andrew Zhan:
Okay. It won't be as easy.
[00:28:36] Jeremy Au:
Yeah. Cause you know, the start of pandemic, if you put in a dollar, you pretty much got $2 at the end of it because there's so much liquidity, faster liquidity, that the Fed was printing and then they gave it to everybody and everybody went on stock market. We went to houses, we went to Crypto and we went to the tech markets like, I mean, look at Zoom, right? Zoom is a tremendous company and I think it has a lot of strengths and I think it'll continue to be a great company for the next decade. It's just that the 2021 price was way above of what the fundamentals actually were in terms of the price-to-earnings multiples. And everybody knew it. Even the CEO was kind of like, hey, this is really crazy price. But you know, people are just like, we have to put this money somewhere.
[00:29:16] Andrew Zhan:
Yeah. So we're saying that we might not be seeing the all-time highs or even higher for the next five years. I mean, of course we don't know how it'll play out. So it's just giving like, okay, could be a long time frame before you see those numbers again.
[00:29:27] Jeremy Au:
Or if the fat print $600 of money in the next one year, then definitely put your money in Big Tech
[00:29:33] Andrew Zhan:
Okay. Well for the rest of us, you mentioned investing in private markets, be great for the rest of us who are not into VC yet. Myself and Jeraldine. How are you managing your portfolio?
[00:29:43] Jeraldine Phneah:
I think when you were asking about timing, is it a good time and all that?? The same all principles apply, right? Like don't try to time the monkey because none of us here would know, like, when is the bottom for? The more everything can just recover and like, you know, and everything. Cause all these things are out of our hands. Where is a good time to invest or not? Depends on what you invest in, right? So if you do find solid companies, great fundamentals, doing really well and executing really well, then by all means, continue to put your money there because you are basically getting them at actually a very good price. So yeah, don't time the market and then stick to the basics, like focus on fundamentals, and make sure that you know what you are investing in.
[00:30:22] Andrew Zhan:
But ultimately, believe in tech stocks, right? Give it five years, or 10 years, in the long-term perspectives of it.
[00:30:27] Jeraldine Phneah:
Well, not, not all tech companies are made equal. So, yeah. At least for the ones that I've put my money in, I do believe in.
[00:30:41] Andrew Zhan:
Okay. All right. Okay. All right. Thank you.