{"id":34399,"date":"2023-10-20T14:33:34","date_gmt":"2023-10-20T14:33:34","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/stock-market-turmoil-an-opportunity-for-startups-startupsmart\/"},"modified":"2023-10-20T14:33:34","modified_gmt":"2023-10-20T14:33:34","slug":"stock-market-turmoil-an-opportunity-for-startups-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/stock-market-turmoil-an-opportunity-for-startups-startupsmart\/","title":{"rendered":"Stock market turmoil \u2018an opportunity\u2019 for startups – StartupSmart"},"content":{"rendered":"
\"\"<\/div>\n

Australian investors say this week\u2019s global stock market volatility can be seen as an opportunity for local startups as attention turns away from commodities. <\/p>\n

\u00a0<\/p>\n

The series of crashes, which stemmed from growing concerns over the Chinese market, will hit angel investing in Australia the hardest, experts say, while publicly listed high growth tech companies should emerge relatively unscathed in the long-term.<\/p>\n

\u00a0<\/p>\n

Since 18 August the Dow Jones Industrial Average has dropped by more than 9%, while the Nasdaq is down 10.5% with worries over global growth triggering the worse sell-off in four years. Meanwhile, the Australian dollar is currently trading at 71 US cents.<\/p>\n

  <\/p>\n

An opportunity for Australian startups<\/b><\/h2>\n

<\/b><\/p>\n

Rampersand co-founder and managing partner<\/a> Jim Cassidy says startups by their very nature are well-placed to capitalise on an unstable market.<\/p>\n

\u00a0<\/p>\n

\u201cBouts of volatility cause investors to focus on the fundamentals and really drill down into what the business is worth,\u201d Cassidy says.<\/p>\n

\u00a0<\/p>\n

\u201cThis could actually be a good thing for those Australian startups that are more used to capital constrained conditions and are therefore better trained at using cash wisely and focusing on the bottom line.<\/p>\n

\u00a0<\/p>\n

\u201cAustralian startups that have strong growth as well as fundamentals could be seen as stronger and less risky investments than companies which have simply demonstrated growth but no profitability.\u201d<\/p>\n

\u00a0<\/p>\n

KPMG Australia<\/a> head of innovation James Mabbott says the investors retreating from the stock exchange could provide a range of opportunities for startups.<\/p>\n

\u00a0<\/p>\n

\u201cWhen people take money out of share markets they\u2019re looking to put them into other areas. One might be venture capital,\u201d Mabbott says.<\/p>\n

\u00a0<\/p>\n

A further move away from commodities<\/b><\/h2>\n

Starfish Ventures<\/a> co-founder Michael Panaccio agrees, saying the recent market volatility can be viewed as a potential opportunity for startups, with investors turning away from the China market and commodities and looking to domestic opportunuties.<\/p>\n

\u00a0<\/p>\n

\u201cThere\u2019s an opportunity whilst we have global uncertainty for more money to be flowing into startups to hopefully create the jobs of tomorrow,\u201d he says.<\/p>\n

\u00a0<\/p>\n

\u201cIt\u2019s really important for Australia to build a really vibrant startup culture with high valued jobs.<\/p>\n

\u00a0<\/p>\n

\u201cYou often hear how volatile those markets are. You have great returns but that could be wiped out overnight. You can deal with a company in the long-term in Australia.\u201d<\/p>\n

\u00a0<\/p>\n

Blue Sky Venture Capital<\/a> investment associate Ben Dunphy says the recent volatility could add momentum to a push from investors away from the mining industry and towards technology companies.<\/p>\n

\u00a0<\/p>\n

\u201cBlue Sky strongly believes there will be continued shifts in the quantum of capital invested in different alternative asset classes in Australia,\u201d Dunphy says.<\/p>\n

\u00a0<\/p>\n

\u201cHistorically in times of market stress we have seen alternative asset classes outperform more traditional investments, so there is the potential for a shift toward more diversified investment portfolios which include a higher portion of venture capital.\u201d<\/p>\n

\u00a0<\/p>\n

The impact on angel investing<\/b><\/h2>\n

Panaccio says the biggest impact of this global instability will be on angel investing.<\/p>\n

\u00a0<\/p>\n

\u201cIf you think back to the tech bubble crash in 2001 – that saw a decrease in angel investing,\u201d Panaccio says.<\/p>\n

\u00a0<\/p>\n

\u201cThey tend to invest when they feel wealthy, and although the retreat in markets might be 4 or 5%, they might have lost a lot of money, making them less likely to make investments in the future.\u201d<\/p>\n

\u00a0<\/p>\n

This could also lead to bigger corporations reducing their investments in startups, Panaccio says.<\/p>\n

\u00a0<\/p>\n

\u201cCorporates are a bit like the angels. When corporates get under pressure in terms of share price and profitability, the first things to disappear are venture capital and funding.\u201d<\/p>\n

\u00a0<\/p>\n

Publicly listed startups to bear the brunt of global falls<\/b><\/h2>\n

Publicly listed Australian startups are being hit hard by stock market collapses, but Australian investors say they\u2019re coping well compared to the rest of the world.<\/p>\n

\u00a0<\/p>\n

\u201cThe Australian ecosystem may be able to weather the storm with smaller declines in value,\u201d Dunphy says.<\/p>\n

\u00a0<\/p>\n

\u201cIf investor uncertainty persists there is likely to be a lower appetite for risk which would logically imply that companies who have been valued by investors on future growth or other non-GAAP metrics could suffer the most.\u201d<\/p>\n

\u00a0<\/p>\n

This is likely to be a short-term problem for these startups, Cassidy says.<\/p>\n

\u00a0<\/p>\n

\u201cPublicly listed startups will likely see their share price fluctuate massively in these periods, which makes it harder to raise equity,\u201d he says.<\/p>\n

\u00a0<\/p>\n

Starfish Ventures-backed wearable biotechnology company dorsaVi<\/a> is listed on the ASX, and began to seek a funding boost at the worst possible time earlier this week, but still fared well.<\/p>\n

\u00a0<\/p>\n

\u201cThat was in the heart of this situation on Monday. It was definitely the worst day to have done it, but they managed to raise the money as planned,\u201d Panaccio says.<\/p>\n

\u00a0<\/p>\n

But as the world\u2019s stock markets continue to rapidly rise and fall, the true impact of these fluctuations in the long-term is yet to be determined, Mabbott says.<\/p>\n

\u00a0<\/p>\n

\u201cTime will show how it plays out,\u201d he says.<\/p>\n

\u00a0<\/p>\n

Raising your <\/i>first round of capital<\/i><\/a>? Starting a <\/i>crowdfunding campaign<\/i><\/a>? Want to grow your business <\/i>with Instagram?<\/i><\/a> StartupSmart School can help.<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

Australian investors say this week\u2019s global stock market volatility can be seen as an opportunity for local startups as attention<\/p>\n","protected":false},"author":2,"featured_media":62367,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/34399"}],"collection":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/comments?post=34399"}],"version-history":[{"count":0,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/34399\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media\/62367"}],"wp:attachment":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media?parent=34399"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/categories?post=34399"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/tags?post=34399"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}