Pre-IPO Profits

How to Invest in an Overheated Market

How to Invest in an Overheated Market
By Adam Sharp
Date June 8, 2021

It’s been a fascinating last year and a half in the startup investing world. We went from a complete meltdown in March 2020 to one of the hottest venture capital markets I’ve ever seen.

I’ve been quite selective throughout this time, preferring to stick to early-stage deals outside of the San Francisco area. That’s worked quite well, but I get the feeling that this strategy is becoming a lot more popular. Around 95% of deals I look at today are what I would call “pretty darn overpriced” — regardless of where the company or deal is based.

I suspect that the startup market will start to cool down soon. Hopefully, prices will be lower in a few months. 

So I’m scaling back my startup investing until then. I think markets in general are just so incredibly overheated right now — stocks, bonds, crypto and just about everything else. If you invest in startups during times like these, from what I’ve seen, it’s very difficult to make money — even over longer periods of time. Price matters — even at the early stages.

Generally, I’m not a fan of sitting on cash. But right now, I’m OK with the large cash position I currently have. Until the markets cool down, many investments just aren’t worth it.

Lately I’ve been buying mostly precious metals and miners. I continue to believe that inflation is likely here to stay for quite a while, and that the average person has almost zero exposure to gold and silver. It’s one of the few investments out there I feel has an excellent risk/reward ratio. A few names I own include Sprott Junior Gold Miners ETF (SGDJ), Kirkland Lake Gold (KL), Sprott Physical Gold Trust (PHYS), Sprott Physical Silver Trust (PSLV), Wheaton Precious Metals (WPM), Pan American Silver (PAAS) and K92 Mining (KNTNF). 

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