The technology sector needs to be monitored to anticipate the future in other industries and in other countries
Over the decades, in every economic crisis, technology has been the industry that has acted the fastest and served as a “canary in the mine”. For this reason, the technology sector needs to be monitored to anticipate the future in other industries and in other countries.
On Monday, June 13, the S&P 500 stock index, one of the indicators that measures the economic evolution of companies, entered the so-called Bear Market again. Which means your value has dropped 20% from your last high. This year is the second time this has happened and there are parallels with the crisis of the year 2000.
Another important indicator is the employment situation in technology companies. Big companies like Facebook, Uber or Twitter have stopped hiring, while many startups of all sizes are laying off between 10 and 30% of their staff (Paypal, Netflix, Klarna).
The crypto world is not far behind: the companies that act as exchange houses, Coinbase and Crypto.com, are also firing people. The decentralized crypto lending platform Celisus has suspended all withdrawals due to extreme market situations.
And as a result, the prices of cryptocurrencies have just crossed the trillion dollar threshold (trillion in English notation). With Bitcoin down another 15%, Ether is down 16% and Solana is down 7%.
Not all investors are panicking, there are those who look to the long term and are the light at the end of the tunnel. Amid panic and suffering: a16z maintains crypto optimism.
a16z has raised its fourth crypto fund. In other words, it has been given $4,500 million to invest in both early stage projects (33%) and more consolidated projects (66%). He couldn’t make his position any clearer: “While prices are often a lagging indicator in some industries, they are a leading indicator in crypto. The prices are a hook. Numbers stimulate interest, which leads to ideas and activities, which in turn leads to innovation.”
There are several reasons to explain the situation we are in: among others the cessation of economic incentives by central banks, inflation, the war in Ukraine, logistical problems.
On this point:
Historically, crises have been situations in which mergers and acquisitions have glittered in their absence: the great recession, the 2008 crisis and the pandemic are clear examples. What can companies do in the current situation, where turnover and market valuations are falling:
Large companies with a lot of savings (box): They can buy other companies, either for the product or for the people, to accelerate their business. Usual suspects: Apple, Google, Facebook or Microsoft.
Large companies with no savings, but with a high valuation: they can no longer use their shares as a bargaining chip to buy companies that promise growth. They should start to focus on generating profits rather than increasing revenue or users.
The “small and medium” startups that are profitable are able to sign up with the startups that are not profitable and seek funding from investors who now want to listen to them. Although the available investment is MUCH lower.
The “small and medium” startups that are not profitable have to change their focus and their business towards profitability, rather than pursuing growth, in order to survive the coming years.
In the technological environment, growth in many cases obscures profitability. This only makes sense if there is a network effect dynamic in your market and only one company can survive.
In the rest of the situations, unicorn valuations and the urgency for growth lead to corrections, first of valuation that affect founders and investors and later corrections of the company’s workforce that affect employees and their families.
It’s Silicon Valley’s game, but the most dangerous thing is to try and mimic it from the outside, without having the same weapons.
Source: La Verdad
I’m an experienced news author and editor based in New York City. I specialize in covering healthcare news stories for Today Times Live, helping to keep readers informed on the latest developments related to the industry. I have a deep understanding of medical topics, including emerging treatments and drugs, the changing laws that regulate healthcare providers, and other matters that affect public health.
