Growth vs Recession : which side are you on !!

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Its time of recession you hear a lot of people say, business is not well then there are others who have carved out opportunities  in these dark times.

I have been hearing two things lately from people I meet.  And largely you can divide them into two groups. First group is the people who are saying stay safe lie low, if you have a job thank your stars and stay put don’t make a move till 2009 is over.

Then there are the others, the more fearless ones who are feeling the change are seeing the half full glass.

You might have heard a lot of the negative side I would like to put in front of you the arguments of these crazy fearless people and let you be the judge of their sanity :) here are their arguments

They are saying since there are budget cuts every where, companies with smaller foot prints are getting a chance to present them selves. People who never considered smaller service providers or vendors are considering smaller companies who can offer competitive prices. They are saying companies who previously never even gave them audience are opening to doing business with them because they can provide competitive services at rates lower than bigger counterparts.

Second argument they have is that quality human resource is available at pays that smaller companies can afford. Because all the big ones are shedding of extra weight human resource is available to newer companies at packages which they can afford. And because the fact that bigger is secure no longer holds true, the employees are understanding the reality that at this time a smaller company has more chances to pass through this recession than bigger companies. This is helping these newer companies to start attracting good talent.

Another thing they say is cost of running has gone down a little, with rents going down with this recession. Landlords agreeing to offer their space at lesser security deposit and lesser advance makes it easier for some one to setup a shop.

I don’t know if you agree to these points or not but in last few weeks I have seen 3 people leave their secure jobs and start their businesses.  Have seen an exponential increase in head hunting efforts by companies who are deeply rooted here, and as of now know at least 3 companies who are hiring like crazy.

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  • For a view of how the credit crunch and economic downturn is affecting funding for tech startups in the U.S., see this chilling March 30, 2009 presentation from Fenwick LLP.

    It talks about creative dilutive financing (cram downs), reductions in force (RIFs), down rounds, and adjustments in equity among existing investors without a new round.

    http://www.techflash.com/venture/Startup_attorneys_Survival_is_the_new_growth_41920647.html

    The economics of startups in the West are not connected with the climate for startups in Pakistan, where opportunities are much better if the necessary inputs can be made available.

    In Pakistan I’d like to see a new venture fund created to focus on early-stage startups. The fund would need about $20-25 million for a projected lifespan of five years.

    Investments would initially be targeted at the level of angel and series A rounds. In other words, modest funding amounts, provided early and often, in manageable tranches.

    Funding would be provided concurrently with assistance in marketing, branding, sales and business positioning. Expertise would also be made available to assist with contracts, customer service and the protection of intellectual property.

    We need incubators in the major cities with business support capabilities, international experience, and the ability to write cheques to keep startups going for two to three years. Incubators should have people on board with the marketing savvy to create and sustain revenue streams.

    The payoffs would be huge because costs in PK are so low. And there is a pent-up demand for applications that local startups are uniquely positioned to create.

    We can do this.

  • I liked Anthony’s proposal!

  • AarpixJobs.com is an example of a low-risk early stage investment opportunity that with a modest amount of venture capital could earn excellent returns while contributing to the larger economy by making it easier for people to find employment and for employers to find the right recruits.

    Not only that, but if VC were available, AarpixJobs could begin providing human-resources outsourcing services for employers globally, enabling employers to save money while improving their human resources practices.

    Human resources outsourcing includes scheduling, payroll administration, compliance, insurance administration, tax filings, client billing, resume screening, database mining, recruitment, managing temporary employees, support for health and safety, medical benefits administration and more.

    Some Indian companies have jumped into the HR outsourcing field without understanding labour markets and HR practices as well as AarpixJobs.

    Human resources outsourcing is a rapidly growing service area that would be perfect for multiple startups from Pakistan. We could see numerous HRO companies in Pakistan serving global clients and rarely competing against each other for contracts because the field is so large.

    Investing in early stage technology-enabled companies will have positive spin-offs for the entire economy. Great opportunities exist, but unless startups such as AarpixJobs can gain easy access to capital, we will be reduced to watching those opportunities benefit competing outsourcing destinations.

    The payoffs for investing in early stage companies are larger than at any other stage of a company’s history.

    Risks for investing in startups such as AarpixJobs are low because there is no mystery to the market size, growth potential, or technology inputs. There are enough lateral market verticals available to create a 400 person company that will be well positioned to go public. Or half a dozen similar companies.

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