TechCrunch after CreditCrunch? Doom or innovation drive?
Money will be scarce as large investment banks and the main investment insurer have gotten into financial problems.
Start ups
Typically VC’s have a score rate of 1 good exit on 10 investments.
As money resources have become limited, the Venture Capitalist company needs to select its investments even more carefully.
This usually leads to risk adverse investments, probably less innovative, thus less innovation and implying less change.
Business plans will need to show revenue during the first year and a break-even operating income on the profit & loss within 2 years. This will require selling the products or services during the first year and getting lead generation almost from the start.
In any case for the second time in 7 years, burning money companies are doomed.
Grown ups
Grown ups are companies that have their start-up phase behind them, will address investment banks or bankers for additional money such as loans, bridge loans or even convertible loans. Just for the same reasons and the problems of the credit insuring institutions, less risk will be taken.
Companies that have a proven track record of sales and customers (preferably recurrent revenue) will be in favor of getting additional money.
Innovating businesses or businesses that aren’t break-even yet will be avoided by investors as much as possible.
This makes these companies the perfect prey for larger well funded companies as an acquisition target and will lead to consolidation of the market.
As a company, getting into break-even is a must be. Thus they need to cut costs or increase their sales over a very short time.
- Cutting costs seems the easiest, but this can jeopardize the future of the company as new developments are scrapped.
- Increase sales will be hard to do too: business models can be changed, prices can be lowered or new markets can be addressed by repackaging or marketing differently the current solution. This requires creativity and marketing initiatives that are not just spending on advertising.
Large or established corporations
Many opportunities will exist to acquire new technology at a fraction of the research and development costs, if these technologies would have been developed internally.
Moreover the proposition for acquisition could go as far as offering the founders a future n the company and the investment bankers a less than initial invested capital return. This could be for both parties better than getting into a bankruptcy, where no-one gets anything.
Technology innovation as the disrupter of doom
All the above is true, only if no technology change or advances are brought to the market.
This is probably not applicable for all industries, as in very mature markets little technology advances are possible.
However even if in just a few industries new technology advantages become available on the market, the beneficiary effects can spill over into the mature markets, by decreasing operating costs.
Technology progress spills over
One possible example are the new services of Amazon: EC2 and S3.
These new services allow software companies to dispose over significant lower cost solutions for supplying web services.
In return these companies can offer web services at a lower cost:
- New companies can start up as they see a feasible opportunity
- Grown-up companies can address new segments in the market and thus obtain new market share.
This innovation will act as a domino effect upon their customers.
The web services companies will be having lower operating costs themselves, allowing them to take market share and grow their business on their turn.
In other markets the technology disrupter can be in place since a long time, but not being applied completely.
- In retail banking the banks will increase their online banking services in order not to have any transaction in their branch offices (as the continental European banks have done since long) and having solely advice (sales) functions in the branch offices.
- Airlines will stimulate online bookings and self registration at the airports.
- Companies will rationalize their lead generation and sales processes, what will probably lead to Internet lead generation and online interactive sales.
Thus technology advancements and innovation will drive new business and growth again. Doom will be doomed.
What will be the technology disrupter of doom in your market?
More from LEADS Explorer
- Customer Relation Management or Control Reps Manager?
- Successful companies: innovation or good decisions?
- Beta: Public or by invitation?
LEADS Explorer Recommends
This article sounds well, but how everything is related together?