Cameron Chell downplays tech “winter”, sees future for smart entrepreneurs

The startup industry has experienced unprecedented growth in the last five years. Companies like Facebook, Twitter and Uber have become billion dollar businesses almost overnight. The rampant success of these startups has inspired many to leave the corporate nine to five world and venture out on their own. However, like all good things, some experts are predicting the impending end to the startup bubble.

Once dubbed by industry insiders as tech “unicorns”, the scarcity and rarity of these lucrative companies is no longer a one in a million concept. This year alone, 1.3 tech “unicorns” emerged a week, according to Business Insider. According to reports, the number of new startups created in the second quarter of 2015 was equal to the entire year of 2014. If growth remains at the same pace until the end of the year, we could see another 40 to 50 more new unicorns before the year is up. http://www.businessinsider.com/unicorn-born-every-week-in-2015-but-winter-is-coming-2015-8

While growth and expansion are usually characteristics of strength, when growth occurs too quickly foundations are too weak to support the sustained progression. This is what is being forecast for the coming future of startups.  Like in the case of Facebook a couple years ago, the valuation was much higher than what the initial IPO reached which left investors reeling.

Entrepreneur Magazine is reporting that similar high valuations are creating a powder keg situation.  Private markets are valuing companies at what appears to be higher valuations than what’s possible to achieve if and when these companies go public.

“For example, if private investors are valuing Uber at $50 billion (http://www.wsj.com/articles/uber-valued-at-more-than-50-billion-1438367457), this implies the expectation that when Uber does engage in an initial public offering, its value will be greater than what it was given by private markets,” Alex Iskold wrote. “The issue is, that it is not likely to happen.” http://www.entrepreneur.com/article/249808

This speculation has been further validated by the sharp decrease in tech stock value last month. Brought on by quick drop in the Chinese markets, some tech stocks dropped as much as 25 to 50 percent from their recorded highs. http://www.entrepreneur.com/article/249808

Ironically, some tech and market experts have taken to Twitter to announce the oncoming ‘tech winter’ and offer advice.  Softbank President Nikesh Arora warned of the hard times ahead in an August tweet: “Time for entrepreneurs to strap down, don’t waste cash, not going to be as abundantly available as before. Build advantage, focus,” Arora wrote.   http://www.businessinsider.com/unicorn-born-every-week-in-2015-but-winter-is-coming-2015-8

Cameron Chell (https://angel.co/cameron-chell), author, entrepreneur and CEO of Business Instincts Group (http://businessinstincts.ca/), believes it’s time for startups to really focus on delivering a well tuned and unique product.  But, Chell also believes  that some of the concern around ‘tech winter’ is unwarranted.  “The tech sector has had some of the biggest gains in the last decade,” Cam Chell points out.

Like any new industry, there is an awkward stage where growth and expansion don’t come as easily as they once did. “Part of this has to do with saturation,” Chell said. “If you are bringing a startup to market now, you really have to be offering something new and unique if you expect to last.”

Cameron Chell says startups need to focus on ensuring their product and its functionality is user friendly and easy to understand. “They also need to conserve capital, making superfluous expenditures can drain the company’s reserve and put it in danger.” http://www.cameronchell.ca/

While a tech winter may be coming, if a savvy tech entrepreneur doesn’t panic, focuses on producing an excellent product and reserves money, they will ensure they won’t be left out in the cold.