InnMind continues a series of interviews with investors to learn their opinion and get forecasts of economic development and its effects on venture market and startups’ perspectives.
This time we “give a microphone” to Anton Antich, serial VC investor.
It really depends on how well the world governments will respond to the crisis. For now, we are seeing that they are prepared to sacrifice the economy to try to “flatten the curve” – spread the number of critical COVID cases in time so that healthcare systems they have under-financed all the previous years are able to cope. Fundamentals in the economy were strong, but with the quarantine measures that pretty much the whole western world has implemented, we will see mass layoffs, bankruptcies and financial troubles among large number of small businesses and affected industries (travel related at the very least). This will, in turn, lead to reduced consumer demand unless some drastic financial measures are taken, which will, in turn, lead to recession. I have seen a couple of big banks reports where their analysts forecast S&P recovering by end of the year, but frankly, at this time I became sceptical of such optimism – if they really push for quarantine for 12-18 months (and that’s the only practical measure that can avoid bed capacity overwhelming) until the cure is available, the economy will enter a deep recession on par with what we’ve seen in 1929. Let’s hope it doesn’t come to that.
The issue now is high volatility in the markets and a lot of uncertainty in the government actions. I believe a lot the firms will at least take a pause to reassess the situation and adjust their priorities and focus. I don’t think it will come to freezing, but that the conditions will become less favourable to startups is almost a given. However, it really depends on the industry/solution area, as for some of them this crisis presents a pretty big opportunity.
From the looks of it, all of the small business, especially cafes and restaurants, barber shops, local non-grocery stores, service businesses are pretty much screwed. The governments announced certain measures of support, but how efficient they will be we don’t know. Plus, even after the quarantine is lifted – and in the worst case it maybe after 18 months! – it will take a lot of time for demand to return anywhere close to pre-crisis levels. These small businesses are 60%+ of any developed economy, which means these people, these families, will struggle themselves – and reduced demand from them will drive down all the enterprises, too. Obviously, travel, non-essential groceries retail are already affected, but it will spread across all industries just as ripples in a pond.
Regardless of how much damage the economy and society will take, we will see much more focus and demand in:
You have to go into mean & lean mode, even if you are profitable, as in the worst case scenario all of the economy will go into recession, which means all your clients will be cutting non-essential spending eventually. So, the more critical your product is for your customers, the better positioned you are and may even see some accelerated growth. For the rest – it has to be a strategy to survived slower growth or maybe even a decline in sales and wait for the economy to start growing again. Good news is – if you survive this crisis, you will thrive during growth time. So, keep faith, have a plan, take care of your loved ones.
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