On Monday we hosted the inaugural conference for Startup Investor (our paid service) in San Francisco.

The event went swimmingly. A small group of about 55 investors and founders attended.

Bill Papp from MicroVentures did a great talk on late-stage pre-IPO investing. He has deep knowledge in the space. He explained the “why” of firms like Fidelity investing in big pre-IPO late-stage private deals. (Hint: They have 10-plus fund managers who want shares and need to build a relationship with the CFO/CEO.)

Frank Trotter, executive vice president at EverBank (NYSE: EVER) talked bluntly about the state of equity markets. His view was “cautious,” as I interpreted it. His read on bond market activity was enlightening as well… and a little worrying. But again, this is just my read on his presentation. Frank is more entrenched in that world than I am.

Frank Trotter of EverBank

Mr. Trotter also talked about his own trip down Sand Hill Road, back when they were seeking funding for EverBank. They met with many top VCs of the day. All of them turned the now-$2.4 billion firm down…

Kevin Davies, founder of Geekatoo, (a startup we recommended to members), was incredibly helpful. He came to our reception at the St. Regis, engaging with members and explaining things from a founder’s perspective.

Geekatoo does on-demand tech support nationwide. Got a virus on your laptop? Or need a router installed? They most likely have support geeks in your area who can provide fast, on-site assistance. And they’re expanding beyond U.S. borders. He made helpful introductions and is building a nice business.

We also met with Mike Norman of Wefunder, another startup Andy and I recommended to members. They’re doing some very neat things and continue to execute at a high level.

But in the Back of Everyone’s Mind… a Tinge of Worry

Last Friday’s stock dive followed by Monday morning’s roller coaster made for some interesting discussions at the conference.

We were in the heart of San Francisco, that hub of innovation, tech. All things startup. A beautiful city full of interesting and vibrant people.

But all these nice folks happened to be a little freaked out about the market…

It’s amazing what a sharp market correction does to the mind of an investor. The message it sends is near-instinctual: don't buy anything.

That’s most people’s natural reaction to a sudden drop in prices. “Everything just got cheaper, don’t buy!”

It’s (mostly) the wrong reaction.

Don’t get me wrong, it’s OK to free up some cash when it looks like the market could take a turn. Take some profits and all that. Keep some powder dry… I’ve been at around 20% cash in my stock accounts for a while now (and I missed some of the public market run-up because of it, but I simply didn’t see any bargains out there).

There are also unavoidable side effects of a “tightening.” It’ll make raising capital harder for some. That’s something to keep in mind. Look for leaner businesses to invest in, perhaps. Ones that are “bootstrapping,” or growing in a safe, sustainable way, are good here.

That’s not to say the market won’t turn around. The Fed could announce QE4 tomorrow, spiking the punch bowl with grain alcohol. But they might not.

Options are somewhat limited by ZIRP (zero interest rate policy). Any Fed “help” at this point will be of the “creative” variety. (Essentially – a short term boost with mid/long-term risk.)

Earmarked

If you’re doing it right, cash that is earmarked for investment will be invested. It’s not for mattress stuffing.

If you invest in public markets, make a list of the companies you want to buy cheap. Add to them during market corrections on a weekly or monthly basis. Whatever works best for you.

If you invest in private markets, don’t stop looking for opportunities. They will be there. Great companies are often founded during tough times. They learn to be lean. Scrappy.

Private market valuations for new startups are already starting to come down. That’s a good and healthy thing. We were a little extended, even at the early stage I prefer.

So if a great investment comes along but the market is choppy, don’t let that stop you. This applies to private and public markets. Just remember that sharp market moves overextend in both directions. So spread your purchases out over years if possible.

In general, what’s happening today reinforces my belief that humans aren’t well-wired for investing. Too often we buy and sell at the wrong times (more on that here). So much so that the average investor makes around 2% per year in stocks…

I highly recommend reading BlackRock’s research on the impact of emotion upon investment. It’s enlightening.

We’ll cover more on this important topic as we see how things begin to play out. For what it’s worth, I’m not looking for a Fed hike anytime soon.