New years typically kick off with What to Watch lists, People to Watch lists and the like, and 2016 is certainly no exception, especially considering that the Consumer Electronics Show kicks off each year with a slew of new gadgets and gear and predictions/observations (The companies that rule mobile are taking over the smart home, too). But the mood is markedly different in these early days of this new year: the party’s over, and we’re not talking New Year’s Eve. As Ari Levy (CNBC, Silicon Valley’s cash party is coming to an end) put it most succinctly, “2016 is shaping up to be a year of reckoning for scores of technology start-ups that have yet to prove out their business models and equally challenging for those that raised money at unjustifiably high prices.”

First, the facts:

The number of down exits is increasing. (Pennies On The Dollar: How Many Startups Sell For Less Than They Raise?)

Investor Adam Quinton published this post about The Coming Angel Ice Age – it’s a must read

There’s also the State of the unicorns and last year’s (Very Contradictory) Year in Unicorns

Most importantly, there are the simple laws of physics, that don’t operate on zeroes and ones but rather clearly state that what goes up, must come down, and this is the year that the waiter is coming around with the check. There’s always a price to pay, even for Kool-Aid.

Since what man cannot remember, he is doomed to repeat, always good to look back at what caused the first dot com bubble to burst:

A Preoccupation with the Network Effect: Traction was the focus and monetization was only a secondary consideration – and a distant second at best, we might add. Sound familiar?

Overvalued stocks, where the P/E ratio had little to do with the real world, and again, we remind you about the current FANG stocks – Facebook, Amazon/Apple, Netflix and Google – which are the major tech stocks and ask you to “consider that AMZN earned the grand sum of $79 million last quarter and $328 million for the LTM period ending in September. That’s right. Its conventional PE multiple is 985X!”

The Network Effect is nice to have; a business model and profitable business models really are more than just ‘nice to haves.’ Remember MySpace? There’s a cautionary tale for you. They were acquired by IAC, but note to self: acquisitions aren’t fetching the astronomical prices they once were, and the days of the acqui-hire are dwindling as well, and will continue to even more so, as more companies go under and more talent is available.

On the other hand, Google and Facebook were both founded in times of a down market. Not to mention that Google was up against Yahoo!, who owned search at the time, and Facebook was competing with MySpace, which, again, owned the vertical at the time.

The good news is: the industry doesn’t go away, nor will it this time around; it’s merely going to have a long-overdue correction. The recent devaluation of unicorns was certainly a wake up call and Are Instacart layoffs a sign of things to come? “There’s a clear trend toward belt-tightening and financial discipline as 2016 begins,” says Ari Levy.

So as for betting the farm on the Network Effect and believing that you’re going to win over investors that way: once bitten, twice shy and hard for a startup to go to war without a war chest.

The key is to focus differently and to plan wisely. Instead of chasing investors, start  chasing customers. Instead of catering to what Startup L. Jackson called (becoming part of an) ‘assisted living community for the young’ (although what he actually said was “The Uberfication of everything is turning San Francisco into an assisted living community for the young” – same thing), focus on needs, not wants or ‘nice to haves.’

There are always those companies that will thrive – or emerge – even in a down economy, so plan accordingly. It’s far from over and in fact, is no doubt about to enter the next stage and damn the torpedos. Great products/ideas don’t always die. As Startup Jackson tweeted, “When people say “X is dead” remind them that Elvis made $55M last year.” Onward and forward.