boom after a dip

Insights

For those who can ride it out, the tech industry will boom after the 2020 health and financial crisis

With a Coronavirus vaccine estimated to be 12-18 months away and natural immunity at least two years away, the health crisis isn’t going to end anytime soon. The UK isolation and working restrictions will be lifted in the coming months, else the social and economic damage would be catastrophic.

Boris predicts the UK can “turn the tide” within 12 weeks, which is early/mid-June. It’s impossible to say now, but we can hope that isolation will be over by then and working life will resume for those fortunate enough to have kept their jobs.

How is the tech industry reacting?

Valuations

Tech companies need to reassess their valuation. A generalisation is that tech company valuations have dropped 20 – 30%. This will mainly reflect lengthening lead times and increased churn from existing customers. A general fear is that the longer we stay in lockdown, the lower valuations will fall.

Funding and investment timelines

Deal supply lines have dried up. There are no events, networking or accelerator programmes. So bespoke (virtual) introductions by trusted sources, like NOTWICS, is the way forward. Capital is still out there to be acquired. All funds want deals. No deals mean they will be out of business themselves.

On average, a Seed Round or Early Round is now expected to take 6 months rather than 4 months, and a Series A is now expected to take 8 months rather than 6.

Be patient

If you believe in your product, tighten your belts and be patient. There is no doubt that these are worrying times for almost all businesses. There are a lot of distractions and noise circulating. Take this downtime to focus on your business. Develop your inhouse materials that have forever been on the bottom of your to-do list, such as redesigning or updating your website, perfecting your sales/investor pitch, reevaluating your product ecosystem, analysing the effectiveness of your marketing campaigns etc.

The world is changing. Time to innovate.

 

“There has never been a better time to prove you’re
actually selling something people need.”
Chris Lowe, CEO, NOTWICS.

Consider how you can adjust your services, products, vertical or marketing strategy to adapt to this changing time. Take us at Red13.Tech, for example, we’re anticipating a boom in the Health Tech sector, so we’ll be looking to update our website, marketing materials, ads and contacts for this vertical.

How long will the financial crash last?

The financial crash is going to last much longer and will devastate businesses much worse than the health crisis we are currently experiencing.

According to the U.S. National Bureau of Economic Research, the 2008 recession extended over eighteen months. Therefore we are predicting this recession to last anywhere from 1 – 2 years.

Is there a light at the end of the tunnel?

After a financial crash, naturally, a boom will follow. This happened after the 2008 crash and it will happen after this one. The technology industry will experience an unprecedented boom in the 20’s as the world becomes more reliant on technology than ever before. Post-2008 saw the birth of some of today’s biggest tech companies: Instagram, WhatsApp, Slack, Dropbox, Uber, Airbnb etc. We will experience the same metoric rise of tech startups and big tech investments after this current crisis

“It’s all happening in the 2020s. The government is spending like crazy, the boomers are spending like crazy, the millennials are working like crazy. Technology is converging to make things more effective and efficient to open up markets, to open up reach and create opportunities to scale.”
Daniel Priestly, Co-Founder & CEO, Dent Global

The Coronavirus has shaken up the world like never before. We will become more dependent on tech to secure our future. But it’s not just Health Tech and Disease Tech that will flourish, the boom will knock onto all tech verticals. So sit tight, innovate and reevaluate your business to survive this tough time, and be ready for the boom, because it’s coming.

Ryan James

Ryan is the founder of Red13.Tech. His digital expertise and consulting have turbocharged hundreds of tech companies and helped secure over £50m in either seed or series funding.