Earlier this year, Founder Institute CEO Adeo Ressi spoke in Berlin, addressing 2016's funding trends. He detailed how these global trends may impact the German startup scene, and provided advice on how to succeed in the shifting startup environment.
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The Valuation Bubble
Valuations for startup companies have reached an all-time high, with companies that have not seen an inkling of profit sometimes being granted billion dollar valuations. For example, Uber recently raised funding at a $62.5 billion valuation, which is a substantially larger valuation than the value of the global taxi industry which it aims to replace. Beyond these extreme cases, valuations have also increased dramatically for more common, smaller-scope startups.
Adeo predicts that a market correction is coming, and valuations of startups are going to dip. It will impact the United States first, and then arrive 6-12 months later in Germany. He explains that this will not be an insurmountable disaster, nor will it be unprecedented. It all fits into the natural “boom and bust” cycle of technological investment and the global economy in general. Fortunately, Adeo detailed the steps that entrepreneurs can take to weather the storm and emerge from the valuation slide in a favorable position.
Startups in Germany
According to Adeo, Germany is seriously lagging behind in the startup world versus where it should be, and is on pace to get dwarfed by Indonesia. Adeo explained the paradox wherein Germany has a reputation as an industrious and creative country, and a history of creating fantastic products; yet recently has struggled to produce a large amount of excellent startups. While cities like Berlin have been fighting against this problem, with several high-profile startups such as Founder Institute Berlin graduate ItemBase gaining attention recently, the country as a whole has been lagging behind when it comes to startups.
Luckily, Adeo believes that the German startup scene can solve both of these problems and emerge from 2016 in a position of strength. German entrepreneurs need to raise as much cash as they can as quickly as they can in order to ride out of the valuation correction. By doing this, German startups can succeed while other startup regions struggle with the anticipated valuation correction.
Check out the entire speech below to learn more from Adeo: