Category: economic bubbles

Credit Crunch – advice for Startups

Posted on by Steve Sammartino

So the credit crunch is here. This is great news for startups. Great news because the pretenders leave the playing field and reduces the number of players in the game. They often provide flimsy excuses to themselves and us saying things like ‘It’s not a good time to spread new ideas…’

So we need to think about this:

How to win?

  • How do we win when a lot of money is being locked away from SME’s?
  • How do we win by investing our available funds frugally?
  • How do we win by extracting the maximum value from suppliers in a contractionary market place?

In short, how do we extract more value as a ‘bootstrapping startup’ while the VC funded few fall over… scamble for more cash – and run around trying to ‘monetize’ quickly. How can we turn the fact we know how to operate on a tight budget into our advantage?

Now is the best time yet for boostrappers. Now is the time when real value investors, real value extractors and real value providers win.

Business bubbles, history & startups

Posted on by Steve Sammartino

Here’s a list of business bubbles you may / may not have heard of:

 

Tulip bubble – 1630’s tulip’s sold for more than houses!

South Sea Bubble – 1720

Bull market of 1920’s – resulted in the great depression

Japanese asset price bubble – Commercial real estate selling for US$1.5m per square meter!

Real estate bubble every 10 years or so… You’ve just lived through one!

Tech wreck (dot com)– Companies with negative cash flow valued over 1 billion!

Sub prime / hedge fund bubble 2008 – We’re yet to see all of this…

Green Marketing bubble ? – This one’s coming watch out!

 

Many business bubbles are focused in new industries where startups are abound.

 

Here’s when to get nervous. When you hear the words ’it’s different this time’, or people are overly focused on industry growth and the so called – revolution.

 

Here’s when there is no need to get nervous. When your business model based on basic business fundamentals like cashflow and growth in your net cash position. Startups take heed.

 

For 1000’s of years business and industries never grown much over 10% p.a. once compounded. Yes, there’ll be exceptions like Microsoft in the early 1980’s. But generally speaking when things are predicted to grow at rates above 20%, and valuations are more than 20 time earnings….get suspicious, very suspicious.