Although business creation revolves around people with low levels of ambiguity aversion, to echo the words of Hersh Shrefin in Beyond Greed and Fear. Understanding Behavioural Finance and Psychology of Investing, that is, people willing to run risks, we live in exceptional times.
“People are panicked; the public markets are in chaos,” Sifted notes. “No one wants to fund a company with no future or to overpay for a startup with a bleaker path ahead.” As a consequence, “Overall funding has gone down by about 70%, according to the Enterprise Investment Scheme Association,” The Times points out.
How things will evolve? It’s hard to say. McKinsey’s Ian Davis’ words, written in the aftermath of the 2008 financial crisis, are still relevant today: “For some organizations, near-term survival is the only agenda item. Others are peering through the fog of uncertainty, thinking about how to position themselves once the crisis has passed and things return to normal. The question is, ‘What will normal look like?’ While no one can say how long the crisis will last, what we find on the other side will not look like the normal of recent years.”
Startups and startuppers will continue to be part of the next normal as they help the economy to renew itself but, as of now, they seem not to be the priority to some governments.
For example, commenting on the set of norms put in place by the British Government (CBILS), House of Commons’ Chief of Staff Ed Prior claimed on LinkedIn that priority now is “To keep food on the table, keep the economy from collapsing and ensure we can recover quickly and effectively once we reach the other side.” The social impact of the Coronavirus crisis worries governments worldwide as they fear social revolts.
Yet the future finds its roots in the past. This is why players in the startup funding industry are worried. Luke Lang, the Co-Founder of one of the leading equity crowdfunding platform worldwide, Crowdcube, tweets:
So, the industry European trade body, European Crowdfunding Network, has decided to raise a basic impact assessment of the ongoing Covid19 pandemic on the crowdfunding sectors operations and economic prospects.
European Crowdfunding Network’s Director of Public Affairs, Francesca Passeri, asks for help: “We would hope that you could spare a few minutes to provide some input. This will support the European Commission to shape relevant policy measures to support European citizens, business and the overall outlook of our economy.”
Oliver* is happy to contribute by spreading the word around. If you can, please submit your input via European Crowdfunding Network’s online form here. Now more than ever working together is the key.