The bad news is that:
Some analysts say the world is already in a global recession; that we are in a stagflation. The US Fed Funds rate might increase again and stay “high.” This could extend this downturn into 2024. The strong dollar is creating a sovereign debt crisis in emerging markets. High energy prices and European political mismanagement dealing with this are causing problems, and the German GDP and others are decreasing. Dept/GDP Ratio of PIGS and Italy are unhealthy and could cause another Europe crisis. European banks have yet to build reserves and own too much government debt. Real estate prices are falling while buying a house with high rates is not financeable to the people. Additionally, building a house has become too expensive following a global material shortage. China is in covid crisis. Russia and Ukraine war is happening, and it is devastating. And on deglobalizing, Morris Chang, the founder of Taiwan Semiconductor Manufacturing Co., gave a speech at a plant the chipmaker is building in Phoenix, Arizona, on Dec. 6. He said, “Globalization is almost dead, and free trade is almost dead. Many people still wish they would come back, but I don't think they will be back."
The good news is that:
I can’t predict macroeconomics. But for all the above mentioned, I see the following years as a very positive opportunity to invest in private companies (early stage).
The best time to invest in early-stage start-ups is now. And many say, “2023-2025 will be the best years yet for Venture Capital.” Diamonds were made under pressure from 2007-2011. These tech companies were founded between 2007 and 2011 and/or have become strong during that economic downturn:
So the best vintages are ahead; why?
There is an increasing number of outstanding entrepreneurs and opportunities for them to thrive during this economic downturn.
Layoffs create high-potential founders whose resilience is proven under challenging times, and they thus prove to be top performers.
Valuations in the early stage adjust favorably and deliver the highest returns.
Crisis Driven Innovation. Necessity is the mother of invention
Resilience is part of the startup DNA.
Talent is available.
Lower costs than in hype times.
Established companies cut back and are slow (competitive advantage).
If you want to start a company, now is the time!
Suppose you want to invest in venture capital. Now is the time of emerging managers, the hungry, the driven, and the hustling working with the best entrepreneurs!
The best vintages are ahead.