Surprises in Tech from 2015, and What to Do If A Downturn Hits

Opinion

Two tech trends gained surprising momentum this year, which positions them to be key drivers in 2016. Both take aim at the heart of the economy.

Recently the SEC (Securities and Exchange Commission) gave crowd finance a shot in the arm. First it passed Regulation A which provides an exemption to the registration requirements mandated by the Securities Act for small public offerings, and then it passed Title III of the JOBS Act, which allows public solicitation of private investment offerings to non-accredited investors—essentially the general public. Crowd finance is developing dozens of verticals from energy to business lending. According to The Economist, “A new generation of startups is taking aim at the heart of the [financial] industry—and a pot of revenues that Goldman Sachs estimates is worth $4.7 trillion.”

Similarly the on-demand economy is a rapidly growing movement that both tech startups and workers are seizing with gusto and it is poised to fundamentally alter how people work and services are provided. Most everyone has heard of Uber but there are hundreds of companies that have come on the scene: Lyft, Saucy, Instacart, Doggybnb, Dolly, Washio, TaskRabbit. Well, you get the picture. Now 16.6 million workers say they earn 10 percent or more of their income through the collaborative economy. That’s up from 9 million people who said the same last year.

How should entrepreneurs and investors prepare for a future downturn?

You can’t predict a downturn with any more certainty than where the Dow will close at the end of 2016. Entrepreneurs should always be prepared to navigate through the peaks and valleys of a start-up operation. The usual rules apply. Build for a robust market where you can fill a demonstrated need. Always assume that it will take twice as long as planned to meet key milestones and never run out of money. Investors should only put capital into ventures they wholeheartedly believe in and be prepared to walk away when it’s clear there is no longer a reason to believe.

[Editor’s note: To tap the wisdom of our distinguished group of Xconomists, we asked a few of them to answer questions heading into 2016: “What was the biggest advance or most surprising development of 2015?” and “How should entrepreneurs and investors prepare for a future downturn?” You can see other questions and answers here.]

Alan McGlade is a founder and Managing Director of Digital Entertainment Ventures (DEV). He is a current advisor and investor in several media companies and a member of the ARC Angel Fund. Follow @alan_mcglade

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