Will this market downturn lead to the birth of the next Airbnb?

the LinkedIn Take du jour On the technological bruises of 2022, of course, one is optimistic.

Economic downturn will generate the next big technological success – optimists say crisis breeds opportunity.

In the short history of technology, we’ve seen how true this feeling can be. The Great Recession of 2007-2009 spawned multi-billion dollar companies like Airbnb (founded 2008) and Slack (founded 2009).

So, will 2023 and 2024 be the years that Brian Cheskes and Stewart Butterfields appear in the future? Is now “another Airbnb moment”?

Tough times make founders more resilient

Many proponents of the “Airbnb theory” note that tough economic times steel founders facing hardship, which makes them more resilient.

Katja Neesheim founded her first company — a business consulting firm called Mediate — during the Great Recession and her second — an e-learning company for teams called Culcha — at the start of Covid, and while she admits her timing (both times!) was spot on, the circumstances in which she found herself It definitely made her stronger.

“A great company and a great founder that thrives in any circumstance”

“You need ingenuity and courage but also energy and faith to resist the mainstream,” she says, explaining that she left her stable job as an M&A advisor and digital transformation at Axel Springer to found her first firm. “These are all things that make a better founder.”

An incorporation in a crisis certainly makes you more cash-efficient, more resourceful and able to dig deeper into what clients really need, Nitchiem adds: “If you can meet that need, and fulfill it well, there will be a certain degree of readiness (for investors).” and customers) to pay for it.”

A great company and a great founder that thrives in any circumstance. Tomasz Swieboda, an investor who worked for Central European fund Penta Investments in 2010.

Three years ago, at the beginning of a recession, Penta Żabka, a Polish convenience store chain, has become the leading player in convenience retailing in the country. It increased EBITDA (earnings before interest, tax, depreciation, and amortization) by 162% and opened nearly 400 new stores – “all during a time of global crisis”.

New talent in the market

From a recruitment perspective, now might be the best time to try and build a global tech giant.

Mass layoffs mean there is a lot of experienced tech talent flooding the market, which is good news for existence Claude Ritter, co-founder of Cavalry VC, says companies have previously struggled to hire seasoned professionals.

Large iterations have also lowered salary expectations among candidates, meaning even early-stage startups are in a better position. Big tech competition For first-class talent.

Dmitriy Samoilovskyk, serial founder and angel investor, recently founded Uniborn – a Tallinn-based venture platform. who created a file Matching a tool To connect laid-off employees with business angels and venture capital heads – based on his belief that mass layoffs at big tech companies would cause an increase in corporate founding operators in the coming years.

Dmitry Samoilovsky, founder of Uniborn
Dmitry Samoilovsky, founder of Uniborn

“Many have seen how unicorns are built from the inside, so they have a different perspective and insider knowledge of what to do (and what not to do) when laying the groundwork for a startup,” he says. Samoilovskikh.

He adds that these operators have been sitting with their ideas for a while, and have “really thought through all aspects of their business model” and worked out potential issues..

MEconomic and social factors make it difficult to build now

However, there are plenty of reasons why creating the next Airbnb is more difficult right now. Many investors say that it is actually more difficult to scale a successful company now than it was in the first decade of this century due to changing macroeconomic factors.

Back in 2007, we were simply dealing with a recession, even if it was the biggest recession since the 1930s. Swiboda. Now, we are facing additional factors due to the outcomes of the Covid pandemic and geopolitical issues such as Russia’s aggression against Ukraine. Founders have to take more factors into consideration,” he says.

TThings are completely out of control in terms of our ability to predict what is going to happen.”

Those factors include considering whether the company will face supply restrictions in the next few years if China decides to annex Taiwan, he says Knights VC’s Claude Ritter, one of the company’s founders – “And these things, frankly, we’ve never thought about in the past,” he says. Ritter co-founded German food delivery giant Delivery Hero in 2011, when the world had yet to fully recover from the impact of the recession.

He adds that “RThings are completely out of control in terms of our ability to predict what’s going to happen,” and it’s hard to predict which companies will thrive or fail.

A year ago Cavalry’s Nori, an operating system for the hospitality industry, had no problem raising money, but trying to raise the first round of the round this year has been difficult, Ritter says.

Conversely, Patronus — another company from Cavalry’s portfolio, which creates smartwatches to give elderly patients access to emergency assistance — set out to raise €12 million Series A this year, and it’s been raised 27 million euros instead of.

Interest rates are higher now

The second argument for the difficulty of building a mega hit like Slack or Airbnb has to do with how interest rates affect the availability of capital for fast-growing tech companies.

At least some of Airbnb’s success in weathering the recession can be attributed to… Very low interest rates In the United States at the time, Cavalry Ritter says. Central banks around the world at that time lowered interest rates to try to stimulate economic growth and investment.

“The low interest rate was a huge tailwind for (Airbnb), because they were able to raise a lot of money with ever-increasing valuations for a very complex business model that was very expensive to build,” he explains.

The environment is starkly different than it is now as interest rates have gone up exponentially – in the UK, interest rates are the highest they’ve ever been 14 years. This was bad news for founders looking to fundraise. Increased interest rates sent stocks lower, hitting public technology companies and making venture capital more cautious in investing.

Higher interest rates also affect demand: consumers are incentivized to save more and spend less, especially on products that are nice to have rather than basic ones, which reduces demand for consumer products for start-ups.

“Just look at the Gorillas. Nobody gives you money for these kinds of models today — and Airbnb is a similar model.”

“I don’t think you can start an Airbnb today because nobody’s going to give you money for two to three years to build this thing,” Ritter adds. “Just look at the Gorillas. Nobody gives you money for these kinds of models today — and Airbnb is a similar model.”

And with venture capital focused more on supporting companies that can reach profitability—rather than those that simply want to grow as quickly as possible—some truly visionary ideas may be overrun, often taking a few years to find just the right business model.

romantic story

While investors may be well-intentioned telling budding entrepreneurs that now is the best time to start a company — and their company could be the next Airbnb — romanticising a crisis isn’t helpful, Ritter says.

makes potential founders unaware of the challenges of building, Especially considering that fundraising is realistic Very tough.

Claude Ritter, Co-Founder at Cavalry Ventures and former Co-Founder of Delivery Hero

Ritter predicts that a lot of “tourism founders” — those who want to play an entrepreneurial role without having a big business model — will get swept away in the next year because they won’t be able to raise money. Meanwhile, those working on “relevant and impactful technology” in health care or climate will thrive.

Neesheim agrees: “The crisis is the end of the founder-as-a-lifestyle phenomenon. Who can brag about how much cost they saved this week? And how many people got fired?”

“Getting established during a crisis is hard. Nothing for the faint-hearted, nothing for those in it for the money or prestige.”

Is the next big tech success out there?

However, notable innovations have already emerged this year amid a difficult financing environment: GPT-3, a technology that uses deep learning to generate human-like text, and announced the first-ever nuclear fusion reaction at the National Ignition Facility, according to Uniborn’s Samoilovskikh.

“These two advances alone could launch hundreds of new tech startups, and the potential for the ‘next big thing’ can easily be found in any of them,” he says.

Perhaps this shows that new ideas and great companies can be built at any time. When the founders feel compelled to start a business – they will, no matter the situation. Neither Ritter nor Nettersheim paid attention to the economic environment when they founded their company, he tells Sifted: They had ideas and they just jumped in.

So, is the next founder of Airbnb or Slack already among us? Will we see the emergence of life-changing companies in the coming years?

says “sure” Samoilovskikh. “Technology is developing at an exponential rate, so there will never be a shortage of ideas. In fact, now is the perfect time to see the next big tech company take root.”

Miriam Partington is the DACH Correspondent at Sifted. They also cover future work and co-authors The Startup Life newsletter from Sifted and tweets from mparts_

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