The decade-long era of low interest rates that allowed venture capitalists to make high-risk bets is over. Consumer sentiment is souring, while fund managers are increasingly skeptical about startups’ high-growth predictions. With VC investments down 26% in the first quarter, once-highflying startups are laying off staff, slashing marketing spending and doing whatever’s necessary to stretch out existing cash piles.
Original post in Linked in by Todd Baker — For #fintech, the biggest change may be a reassessment of employment risk and reward by a generation of smart and ambitious young people that has assumed that the next job was always available and that frequent jumping was the clearest road to advancement and equity payouts. That all changes when there’s no clear landing place.
Among our findings—assistance reinforced the advantages of large companies over small businesses and created expectations of future government support for #capitalmarkets intermediaries which benefit the largest companies but lack internal resilience.
By primarily providing grants to small businesses, the government helped address their short-term cash flow challenges but did little to encourage ongoing private credit creation for these businesses. By contrast, the nature of the programs used to facilitate financing for the largest businesses provided major support at the moment and created expectations of future support.
These interventions enhanced the viability and attractiveness of inherently fragile #capitalmarkets intermediation structures such as open-end #bond funds, #clos and #ETFs holding bonds and set them up to continue to provide cheap and easy financing for the largest businesses long after the acute phase of the crisis had passed.
By primarily providing grants to small businesses, the government helped address their short-term cash flow challenges but did little to encourage ongoing private credit creation for these businesses. The aid provided was real, but finite in nature. By contrast, the nature of the programs used to facilitate financing for the largest businesses provided major support at the moment and created expectations of future support. These interventions enhanced the viability and attractiveness of inherently fragile intermediation structures and set them up to continue to provide cheap and easy financing for the largest businesses long after the acute phase of the crisis had passed.
