The recent weeks’ downturn in the global economy has dramatically tightened the availability of funding for companies, not only startups but large companies alike. The downturn that started from the US with the uncovering off the sub-prime “fraud” has echoed its effects to all corners of the world as connections between financing houses begin to unravel.
Sequioa Capital, one of the most famous startup financing houses in the US, has held a secret meeting earlier this week. A slideshow from the meeting has fled to the public unraveling the contents of the meeting – short and long term scenarios for the world economy. The contents of the document are not very positive. If the name of the presentation is “RIP – Good times”, I think it says all.
I’ve also heard while discussing with Nordic entrepreneurs that the financing market has, also in Europe, tightened dramatically. This of course means that those seeking funding rounds form the public will face tougher times in years.
I’m expecting we’ll see a huge rise in applications to the government institutions that support and finance entrepreneurs as the private markets tighten. It is natural for entrepreneurs to seek financing at all costs, as it is their only way to survive if they do not have a positive cashflow. This however, in my opinion and even at the cost of receiving a ton of hate mail, does not give the institutions any right to loosen their funding – just to support the companies and keep people employed.
This may seem harsh, but the Nordic startup scene is still very small in terms of employment and thus does not pose a great threat to the GDP. Times like these serve as natural ways to bring about healthy change to the markets with companies that are truly innovative and have a chance of becoming profitable in the near future (ie. are already showing healthy amounts of revenue).
One must also remember that even in difficult times, it is usually the strongest that survive – creating more value in the long run to the individuals as well as economies they serve.