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“Perhaps it marked the beginning of the end when it was revealed a few weeks ago by the online magazine Air Mail that there is a software error in Gulfstream’s popular 500 and 600 models that has sent shockwaves through the aviation community. The error, which causes the aircraft to sink sharply when landing in even fairly light winds, could potentially damage the plane. While it may not be the perfect metaphor for where we are now, it is not a completely lousy parable,” says Judy Shalom CEO and founder of Advedro in her latest editorial.
In times of economic and political uncertainty, it can be difficult to maintain a positive outlook and stay resilient. However, as marketers, entrepreneurs, and finance professionals we must find ways to persevere through these challenging times. Whether it is focusing on our strengths or looking for opportunities in difficult circumstances, there is always something we can do to move forward. So let us be resilient in these times of uncertainty and work together to create a brighter future.
The signs of bad times have been many recently. Now I am not just thinking about the war in Ukraine, soaring energy prices, general inflation, and rising interest rate pressures. We are approaching a situation that is almost reminiscent of the 21st century dot-com crash. Many of you who are reading this text understand what it means, but have not experienced it. So let me first say: this is not fun.
Some analysts talk about future stagflation, i.e. such a situation we saw in the 1970s of increased inflation, but at the same time unemployment and lack of growth. It is a kind of combination of stagnation and inflation. I spoke to the renowned economist Douglas McWilliams and he did not like the term because it does not explain the dynamics. When a state is in inflation, it is simply necessary to increase interest rates to reduce demand and bring prices down. But if stagflation persists, this will not work because people will soon get used to higher prices and carry on spending anyways. Eventually, companies will start cutting jobs and stagflation will deepen. McWilliams says that stagflation is really just a symptom of deeper structural problems in an economy, and it is important to understand what these problems are in order to solve them. Otherwise, stagflation can be incredibly damaging to an economy and very difficult to break out of.
In a recent LinkedIn post, entrepreneur and angel investor Mattias Miksche exposed the current state of the market, describing how limited partner investors are withdrawing promised money and how VC funds are withdrawing already submitted term sheets. He goes on to say the rounds that are being made are only at half the size and half the value, attributing this stagflation to the current state of the economy. While this may be discouraging news for startup companies, it is important to remember that stagflation is a temporary phenomenon caused by an increase in prices without a corresponding increase in wages. With the right management and strategies in place, businesses encountering stagflation can still succeed.
In today’s economy, companies are constantly faced with the decision of how to downsize their business in order to stay afloat. This is especially true in industries that are struggling with stagflation, or a combination of high inflation and high unemployment rates. While it may seem like the logical choice to wait and see how the situation plays out, this can often be a mistake. Companies that take too long to downsize may find themselves in a position where they are forced to make much deeper cuts, which can be difficult to recover from. On the other hand, those that act too quickly may find themselves having to make even more cuts later on. The key is to strike a balance and make sure that you are taking in enough information before making a decision. With the right approach, downsizing can be a successful way to keep your business afloat during tough economic times. For companies that require capital, it is a matter of ensuring that they have a reasonable horizon to achieve profitability and at the same time greatly extend the runway, i.e. the time until the next capital raising. In the latest episode of the popular podcast All-In, investor David Sacks says that today you should see it as now spending the next round of money, not the current round of money. The goal is to get to profitability and then extend the runway as much as possible. He also said that every entrepreneur should think about how their company would be valuable if it was 10 times its current size. They need to have a clear picture of what they are aiming for and what needs to be done to get there. Only then they can make choices that will lead to long-term success.
To put it simply: we are facing a crisis on top of a crisis we already were in.
First, the pandemic: it turned our lives and economies upside down—and it is far from being over. The continued spread of the virus could give rise to even more contagious or worse, more lethal variants, prompting further disruptions—and further divergence between rich and developing countries.
Second, the war: Russia’s invasion of Ukraine, sending shockwaves throughout the globe. These two factors have created a perfect storm of instability and insecurity. They are also a reminder of how interconnected we all are—and how our fates are intertwined.
The economic consequences of the war have been felt by hundreds of millions of people around the world. Families are struggling to make ends meet as prices for food and energy rise. The war has made this situation worse and threatens to further increase inequality. For the first time in many years, inflation has become a clear and present danger. This is especially troubling for those who are already living on the edge of poverty. The war has also led to job losses and reductions in wages. All of these factors have contributed to a decrease in the standard of living for people all over the world. The economic consequences of the war are far-reaching and will continue to be felt for many more months to come, maybe even years.
This is a massive setback for global recovery.
In economic terms, growth is down and inflation is up. In human terms, people’s incomes are down and hardship is up.
FordEV businesses, the last decade has been a roller coaster ride. The dot-com crash of the early 2000s was followed by a relatively long period of recovery, during which many companies struggled to keep their heads above water. Then, in 2008, the Lehman Brothers crash dealt another devastating blow to the economy. In such a difficult market environment, it can be very tough to keep a growth company afloat. However, there are also opportunities to be found in times of economic turmoil. For example, it may suddenly become easier to recruit talented employees, something that has been a major challenge for smaller startups in recent years. Ultimately, whether or not a company thrives in an uncertain economy depends on its ability to adapt and change with the times.
While it is true that the dot-com crash of the early 2000s caused significant financial damages, it is important to remember that the world has changed significantly in the intervening years. We now have a much better capital market, with businesses having greater access to funding. Additionally, entrepreneurs have become much savvier and more cost-conscious. As a result, it is now possible to build and run companies more effectively than ever before. Furthermore, thanks to the increased connectivity of the world, we are able to learn from each other at an unprecedented rate. All of these factors put us in a much stronger position to encounter any future economic downturns. Investors who have been there before can be long-term and see situations and therefore not completely stop being active. At the same time, the signs of an approaching nuclear winter in the capital market are a little too many to ignore.
Investors are becoming increasingly concerned about the possibility of nuclear winter, and there are a number of signs that suggest it could be on the horizon. For starters, the number of new startups being founded has been declining, which could be a sign that people are losing confidence in the future. Finally, the stock market has been volatile recently, which is often a sign that investors are worried about what might happen next.
The bottom line is that there are a lot of potential indicators that a nuclear winter might be imminent. Investors should keep an eye on these indicators and be prepared for whatever might happen this summer. Of course, it’s impossible to say for sure whether or not a nuclear winter will actually occur, but it’s important to stay alert and informed just in case.
Thanks for reading!
Judy Shalom, CEO of Advedro, Entrepreneur, Public Speaker, Podcast host of Marketing Unfiltered, and Author, is a strong businesswoman in shared learning, transparent communication, and visionary leadership. In a nutshell, she is a digital marketing guru and brings her expertise to every conference she attends. She’s an expert in explaining the latest trends, technologies, and innovations that are happening within this industry today – such as metaverse web 3, NFTs (non-fungible tokens), etc.; how they will impact us all for good or bad depending on what we do with them!
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