Headlines in 2015 have been particularly worrisome for global investors. Front pages talking about “The Great Fall of China” and a “Wild Week for World Markets” have seen stocks and share investors around the world make a dash for the door.
Yet while we see listed businesses facing a whiplash effect from China, Greece and the Middle East, the news headlines about high-growth technology businesses seemingly couldn’t be more positive. From record-breaking funding rounds in the U.K. and the U.S. and the blossoming U.K. fintech market or the growth of European unicorn businesses — earlier-stage tech ventures appear to be partially protected from the wider market storm.
Take the news earlier this year that Lakestar, investors behind Spotify, Skype and Facebook, has raised a new €350 million fund, aimed specifically at the European market. All, it appears, is live and kicking in the technology market.
The bottom line is that at times of market instability, entrepreneurial ventures and ecosystems thrive — for a variety of reasons.
Moving To Safer Ground
Market disruption causes widespread worry. As we saw in 2008, there is little safe haven from such uncertainty. Yet there are investment opportunities that retain some independence from the market rollercoaster, in unlisted ventures (as of today, the fastest growing of which are largely technology or technology-enabled high-growth businesses).
It is unsurprising, then, to see investors — both institutional and individual — increasingly seeking alternative investment opportunities, such as early-stage businesses. Businesses founded in recent years also benefit from the highly accessible technology that has flooded consumers and businesses alike in recent years, which has greatly reduced the price of building and scaling a business.
There are elements of the technology ecosystem that actually benefit from some instability.
This, combined with a lack of easy capital in the years immediately following 2008, means these businesses tend to be leaner — run from co-working spaces, constantly iterating their business model in order to better deliver to their customers, with a laser-focus on growth — and may be seen as better investments than traditional, large companies, which can be known — fairly or not — to be less agile in turbulent times.
Incoming Against The Incumbents
The David and Goliath battles of incumbents versus newcomers is one we’re all increasingly familiar with, as times of uncertainty usually mean old contracts are less likely to be blindly renewed. A recent U.K. example is the ripping up of the 93-year-old Met Office contract with the BBC. But it is important to remember that this wasn’t always the case.
Think of the famous 1980s advertising slogan “No one was ever fired for buying IBM.” In times of certainty and settled markets, there is less demand to find alternatives or question the status quo. As such, the incumbents are more likely to be chosen over and over again.
Now compare this to 2008 — management teams getting slashed, new blood brought in, every line of a budget pored over. All of a sudden, new ideas were being discussed and new opportunities considered. It takes a whole new way of thinking to shake the big businesses out of their “rightful” place and allow room for the new.
Time For A Fresh Start
A number of various factors can lay claim to the birth of the current technology boom — from the growth in technology availability through to the disruptive nature of the 2008 banking crash. But there are other arguments that deserve reviewing.
In fact, it’s frequently said that the current technology boom experienced across the U.K., Europe and U.S. is a direct impact of the 2008 banking crash. As with many an argument, this alone is too simplistic — we all know, for example, the importance of everyday technology availability in the current spurt of innovative, high-growth businesses. But the argument does warrant some attention.
For one thing, as discussed, some instability is no bad thing for innovation, opening up opportunities to rapidly scale a business and chances to battle for big contracts. But another key element of today’s entrepreneurial buzz is the influx of talent into the market the U.K. saw seven years ago, as banks and financial services businesses were forced to show their teams the door.
In that moment, talented, intelligent and driven people were forced to question their paths, and in many cases made their first entrepreneurial decision — they pivoted their careers, much like an entrepreneur pivots their venture.
Finding The Funding
On September 15, 2008 Lehman Brothers filed for bankruptcy. Yet businesses were able to raise during the lowest moments of the international markets before going on to great success. Spotify is a well-known example, maneuvering the waves of recession as they raised money in 2008 and 2009, as is Shazam. There is an argument that times of disruption bring out the beast in the belly of the entrepreneur.
Knowing when and how to pivot is a crucial skill of any entrepreneur.
In the early days of any business, you’ll see companies move from an idea to bringing their business to life as they hustle to make their first sales. This combination of entrepreneurial hustling, fresh talent and openness to innovation has the potential to create truly game changing opportunities.
Brave New World
Market disruption is undoubtedly unsettling, and you can’t fail to watch the global markets dramatically drop without feeling concern. But my point is that there remain investment opportunities out there — for example high-growth, unlisted technology businesses — that in many cases are better protected from these fluctuations. What’s more, there are elements of the technology ecosystem that actually benefit from some instability.
As the world shakes, keep your eyes wide open for new opportunities that can be unearthed — and be prepared. Knowing when and how to pivot is a crucial skill of any entrepreneur looking to seize the moment. And that moment could be now.