I don't agree with much of this for two reasons...
1. The bubble for already funded companies burst in the 90s but that didn't dry up funding. The truth is a wealthy person's best bet in a down economy is a small startup. Because the potential upside is so much better than any other investment. A company like Y Combinator can literally fund hundreds of startups and as long as at least one has a significant payday at the end Y Combinator still comes out on top.
2. The problem with borrowing money now, as an American, is the dollar is falling and most people expect another round of Quantitative Easing which will almost certainly exacerbate that. It usually doesn't make sense for a startup to borrow a significant amount of money in a currency whose value is dropping. Because you only get so many funding rounds and you don't want to waste them by not getting enough money to buy what you need. Which is what happens when a currency's value drops after you get the funding.
The dollar doesn't seem to have moved much since 2008. Versus the Euro, it was on a downward trend from ~2004 until mid-2008 or so, but it's been flat since then, albeit with significant volatility: http://www.google.com//finance?chdnp=1&chdd=1&chds=1... Against other currencies, it's down versus the Japanese Yen, but up versus the UK Pound.
In terms of domestic prices, inflation has been running around 1-2%, and futures/bond markets are pricing in an expectation of no inflation, or even possibly deflation, through 2020 or so (with particularly strong consensus in the 5-year window through 2016).
The dollar hit a record low in 2008, not just against foreign currencies but also against measures of value such as gold, soybeans, corn, etc. It got stronger in the intervening years (as you note), except against gold, and is now back down to the 2008 level, more or less.
It usually doesn't make sense for a startup to borrow a significant amount of money in a currency whose value is dropping.
I disagree with this though. Depreciating currency is awesome if you've got debt financing, because all of the value of your debt drops, but you only lose the value of the money you haven't spent yet. OTOH, it might be bad because uncertainty about depreciation will cause financiers to be reluctant to give you good terms.
Now, it certainly is a bad thing when you're getting equity financing, but that really isn't "borrowing".
I agree in the sense of having an asset and paying it back but I was thinking of it in terms of budgeting and getting through the year (or however long)
For example, say you budget for a year of operation and assume you need $1.5 million and get funded at that. Then the value of the currency falls. This means your revenue falls and the value of your cash on hand falls. Suddenly you're out of money and its hard to go back for another round so soon after the first.
That's where I see the problem. If you can survive long enough to pay the debt back in full a down currency works for you but it could be the death of you.
> A company like Y Combinator can literally fund hundreds of startups and as long as at least one has a significant payday at the end Y Combinator still comes out on top.
I understand that Y Combinator only does token investment in terms of money, and gets a good share of the startup in exchange for its brand and the experience and connections of its founders within the VC world. Since the actual money outlay is low, it can afford to fund hundreds of startups.
I doubt that's something that the average "wealthy person" can do.
I used to think I would want to be an angel investor at some point, but being an LP at YC (and maybe at a later stage VC, and get shares in great long term companies directly or via BRK.A, would really meet my goals.
I think it is really hard to become a limited partner in good VCs, unless you are godlike in some domain (which I guess you especially would be when you eventually exit) or were a founder of one of their successful companies.
Yeah; this is assuming a large, successful exit, then reinvesting some of your exit into your investors as an LP. Otherwise you'd be a crappy angel investor anyway.
1. The bubble for already funded companies burst in the 90s but that didn't dry up funding. The truth is a wealthy person's best bet in a down economy is a small startup. Because the potential upside is so much better than any other investment. A company like Y Combinator can literally fund hundreds of startups and as long as at least one has a significant payday at the end Y Combinator still comes out on top.
2. The problem with borrowing money now, as an American, is the dollar is falling and most people expect another round of Quantitative Easing which will almost certainly exacerbate that. It usually doesn't make sense for a startup to borrow a significant amount of money in a currency whose value is dropping. Because you only get so many funding rounds and you don't want to waste them by not getting enough money to buy what you need. Which is what happens when a currency's value drops after you get the funding.