The crisis in the 21st century, what is it?
None of the historical parallels work. This is not 1933, or 2001.
You can find some parallels from many earlier crises and downturns, but a simplistic view that it is exactly like one of the earlier periods is usually accompanied by a sales pitch for a bridge.
Avoid the obvious bomb craters. We don’t know what will happen, but we do know that it is not a good time to sell stuff to banks or to consumers in the US.
You may have a really good contrarian play to sell to these problem markets, but if your plan has any shred of “business as usual” then forget about it.
Today is about the immediate stuff you have to get done to stay in business, to deliver to clients, collect cash and so on. The big picture is looking at how the world might look like 10 years from now and build towards that.
We cannot know what will happen next week, month or year. This medium term view is totally unknown. However it is extremely likely that what is happening today will change the world in fundamental ways. We might see the possibility for a very valuable business in that changed world.
Most of these will be trends that were visible before the Great Credit Crisis, but which become massively amplified and accelerated by the crisis. Yes 80% of start-ups will fail.
They always do and always will.
This rule is occasionally suspended during highly optimistic times, such as those we have just gone through. But it is only suspended temporarily during those times.
Start-up failure is normal. That is the creative destruction that makes for a dynamic economy. If it is your start-up that fails, pick yourself up and try again (or decide that you really don’t want to be an entrepreneur). If it is your competitors failing, stick with it and be the “last man standing”.
This not a good time for new financing or exits. As an entrepreneur, raising money and selling are the two times when Mr. Market matters to you. Valuation does matter at these times and only at these times.The reality today is that nobody will raise money or sell out, who does not need to.
So any deals are likely to be fire-sales.
That may be your reality, in which case get it done and move on. If you don’t have to raise money or sell, don’t spend another nanosecond thinking about it. Start your most audacious venture now.
This is counter intuitive but real. No VC will back a small plan. They never have in the past and won’t now. When the world changes in big and fundamental ways, big and fundamental opportunities arise.
Ten years from now it will be obvious what those fundamental changes are. Great entrepreneurs spot one of those trends before it is obvious. The beauty of a big and audacious plan is the next few years won’t matter to you. Build in tough times, launch when the worst is over, exit when it is boom time again.
This is a good video that visually explains the crisis.
It is worth of your time if you have not watched it before. The video tells that the crisis is actually rooted by capital itself. the current presentation of capital indefinitely amplifies the greedy side of human nature.
We truly need to invent a new presentation of capital (in contrast to manipulate any economic theory) in order to avoid this type of disasters in the future.