In the Midst of Chaos, There is Also Opportunity.
Warren Buffet has a quote that, in a paraphrased form, advises smart investors to do the opposite of general sentiment. This philosophy is resurfacing now that we are seeing daunting collapses in several markets — alongside unprecedented, abysmal economic conditions, mind you.
Because I cannot offer investment advice, I approach this topic from a philosophical perspective (yeah, like that’s worth much) and apply it to what I do know for sure: entrepreneurship. In terms of putting your money where your mouth is, these ethics apply to angel and venture capital investors.
Particularly in the tech sector, we have seen the rise of many startups during an economic heyday. To accompany this, there has been a surplus of venture capital flowing into the sector and building companies that look fantastic…when all other things are going swimmingly.
Now, the tides have dramatically changed. Many companies will be forced to rely on their cash reserves to operate, creating the illusion of a flourishing business. This will stand true for many businesses in the tech sector, who are ill-prepared but are held up by investors who had cash to spare during our peculiar economic bubble.
Why is that worth noting? Because in the next 6–24 months we are going to see a complete shift in the entrepreneurial landscape. Unicorn ventures are going to collapse and underdogs are going to rise. History has made a point of this, in that companies that are “blossoming with potential” are thrown under the bus when their business models and leadership alike crumple under systemic pressure.
To be quite frank, a recession provides an opportunity for investors to separate the wheat from the chaff. Bad ideas will not going anywhere, bad leaders will not get any attention, and bad businesses will fail (and this isn’t to say that good businesses can’t fail during economic hardship, but they will at least be offered a compromise: evolve to survive or succumb to failure).
Much like a desert, only the strongest creations can survive. It’s critical to keep this in mind, especially for entrepreneurs who are nervous given the circumstances; if you possess an idea that is truly valuable, it will prevail despite the obstacles. And if you are trying to make a quick buck, you will be exposed.
This message can be utilized from both sides of the glass. Whether you are starting a company or investing into a company, this environment is doing a considerable amount of work on your part; beat the downtrodden circumstances and you’re halfway there. This does not suggest that it will be any bit easier, but there is an amplified exponential curve applied: it may take longer to launch, but once your business is off the ground, there will be plenty more factors working with you than against you.
This truth is the result of several factors: first, there will be a shortage of companies launching. Those who do persist despite terrible odds will certainly earn the spotlight. And the fact that a company is growing when the rest of the market is receding? People will absolutely desire dumping money into something that will protect them from financial loss.
Ideally, you can then carry this momentum into fruitful economic times, where the company can continue to grow and prosper. This process only really works once though — once the business has been operational for a few years, there is seldom any stardom to shield from economic recession. But at that point — arguably — it does not matter.
In the midst of chaos, there is opportunity. If you want to succeed now, you must maintain a level head and a stoic approach to the surplus of problems that have arisen. In these troubled times, many will look for leadership and wisdom. Humbly, I suggest you find a way to capitalize on this.
In a way, I am trying to apply the same principles. When I founded e-States in June of 2021, many things were different — the stigma around crypto had not been further damaged, inflation was not running rampant, the economy wasn’t in a recession, venture capital hadn’t hit a historic low. And yet, here were are a year later, still trying to launch — and I don’t plan to change that.
Every aspect of the company has been designed for stability and dependability, even during unstable times. Real estate is the only mainstream investment that is backed by a tangible item (look away from commodities for just a moment), which helps to monitor and potentially mitigate any loss. The aspects of blockchain that we have chosen to apply will continue to be useful even if cryptocurrencies have declined in value.
Many people asked why I designed e-States in a hybrid fashion. Now, you have an answer. It’s a system of checks and balances, avoiding weakness in real estate (illiquidity) and blockchain (instability) while capitalizing on their strengths: stability (real estate) and liquidity (blockchain).
As a society, we are not ready for a faithful leap into all-things-crypto. In fact, this can be said about many markets; don’t put too must trust in investments that rely on skepticism and sentiment. Knowing this, I instead wanted to build a bridge, from traditional finance to decentralized finance.
I acknowledge that I speak from a position of naivete. So I ask, in your experience, have recessions been beneficial or damaging to good startups?