Are we really approaching a recession?

In my podcast, I explore various aspects of high tech, from development to marketing, to sales, to entrepreneurship, all with the goal of gleaning key insights for listeners on startups to gain value from this knowledge sharing. So what did I get this week?

The world is going through something. Okay, that might be a big statement. At least the tech sector is, to be sure, going through some ups and downs. Looking at last year’s unprecedented numbers, from a global perspective, technology seems to have reached its peak. VCs invested a total of $643 billion, compared to $335 billion for 2020, marking a dramatic increase in the total amount of funding allocated to startups. Moreover, there were also records for the number of unicorns and venture-backed companies that went public. As a matter of fact, About 238 companies valued at more than $1 billion in 2021 were announced, which is 4 times the number of companies in 2020.

However, he did not show the same enthusiasm in 2021, 2022. In keeping with last year’s records, VCs are cutting back on funding rounds, companies are downsizing in droves, and even others are closing their doors for good. There are even jokes that now may not be the time to start a startup (because) there doesn’t seem to be anyone willing to give money.

Many experts in the industry believe that the trends we see in the tech industry are expected. After all, what goes up must come down. However, is this a mere market correction or is it something that could have a much bigger fall ahead?

Seeing both sides of the market

“We’re in the middle of everything that’s happening now, we haven’t reached the bottom,” Tzvika added. He looks in the markets. With BDO providing financial and accounting services to startups and institutional investors, Tzvika has a more comprehensive view of how the technology space interacts, although he in no way represents BDO’s official opinion or provides financial advice. Despite the alarming trends that indicate over-correction in the market, Tzvika seems to suggest that we are still ‘too early in the process to find out’, but, in many ways, we are returning to the feeling of how things are. They have to work.

The Tzvika that we are seeing now As it began to manifest itself in the middle of 2021, in a certain way, no one paid attention. As Tzvika explains, “You can see that even though the Corona markets are hovering, money is not a problem. But if something is too good to be true, it isn’t, and we could see SPACs collapse in mid-2021, and that’s when that hot air starts to come out. In the year In addition to SPACs losing steam in 2021, as 2022 approaches, there has been a slowdown in mega deals and unicorn announcements, which were previously a weekly occurrence in 2021. He “and then hot air came out” more than before.

Enterprise investors, along with other institutional investors, have stopped marking and overvaluing companies. Although the rounds in 2021, 2022 may take some time, and due diligence in 2021, 2022 will finally bring everything back into shape. As a result, the March 2022 funding rounds began to decline in valuations and liquid capital, and prices from 70-80% lower than in 2021. “VCs still invest. The money is still there but the prices are low. Tzvika emphasized here that while this could lead to something big, the market is simply reverting to pre-2021 interactions and giving the meaning of ‘more year’.

What does this mean for founders?

In fact, the future is uncertain. Reshaping the market may mean some companies fail – even the good ones. However, “the market is not in a crisis like in 2008, there is still money in the market, but last year was not normal and you can’t run this way,” Tzvika told me. In terms of removing warm air, the market is doing just that. Tzvika stresses that companies should consider the current market conditions: rounds may not be as quick or large and may require more due diligence. If money was freer last year, in today’s markets, it won’t be and founders who realize this early will be better equipped to weather the storm.

Plus, now will be the time to really put technology to the test. “Investors are coming into the market and seeing it as an opportunity market,” said Tzvika, discussing the fund’s ability to expand and grow, “but they are very demanding on their valuations and have the ability to play hardball.” Good and strong companies can demonstrate this to investors, especially those with strong technological innovation and unique value. Investors are not ready to give their money to any company; They only seek funding for those who solve a real problem.

While this may not be the specific or specific news people want to hear, Tzvika makes a great point that at the end of the day, the market is still volatile, and we don’t know how long the heat will last. Let them go. But we know that 2021 is gone and successful entrepreneurs will have to adapt to the new realities of 2022 if they want to survive.