Tag: funding

S&P 500 ends at lowest level in a month as investors monitor signs of China’s weakening economy

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U.S. stocks closed sharply lower Tuesday as investors monitored signs of China’s darkening economic backdrop and gauged if a robust U.S. consumer could spell more Federal Reserve rate hikes. The Dow Jones Industrial Average DJIA fell about 360 points, or 1%, to about 34,946, according to preliminary FactSet data. The S&P 500 index SPX dropped 1.2% to about 4,437, its lowest close since mid-July, according to FactSet. The Nasdaq Composite Index COMP ended 1.1% lower. Chinese retail sales and industrial production in the world’s second biggest economy grew less than expected in July. Its growing property woes also contributed…

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August 15, 2023
Stocks close lower, S&P and Dow post first weekly loss in 3 weeks after historic U.S. downgrade

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US. stocks closed lower Friday, capping off a volatile week that finished with losses after Fitch took away its top AAA ratings for the U.S. and government bond yields embarked on a wild ride. The Dow Jones Industrial Average
DJIA,
-0.43%
fell about 150 points, or 0.4% on Friday, ending near 35,065, according to preliminary FactSet data. The S&P 500 index
SPX,
-0.53%
shed 0.5% and the Nasdaq Composite Index closed 0.4% lower. For the week, the Dow posted a 1.1% decline, the S&P 500 a 2.3% drop and the Nasdaq shed 2.9% since Monday, according to FactSet. Investors were focused on July jobs data released on Friday for clues to the health of the economy and potential next moves by the Federal Reserve on rates. The 10-year Treasury yield
TMUBMUSD10Y,
4.045%
swung almost 13 basis points lower on Friday to 4.06%, after briefly climbing to about 4.2% earlier in the week, according to FactSet data.

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August 4, 2023
S&P 500 books biggest drop since April after U.S. loses AAA ratings for a second time

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Stocks fell on Wednesday, a day after Fitch Ratings lowered its U.S. debt ratings to AA+ from the top AAA category, pointing to its growing debt burden and “erosion of governance” over the past two decades. The S&P 500
SPX,
-1.38%
fell about 63 points, or 1.4%, ending near 4,513, booking its biggest daily percentage decline since April 25, according to preliminary Dow Jones Market Data. The Dow Jones Industrial Average
DJIA,
-0.98%
shed about 1%, while the Nasdaq Composite Index
COMP,
-2.17%
closed 2.2% lower. Stocks already had been taking a breather from their march toward record levels when Fitch on Tuesday evening made good on a threat to downgrade its U.S. debt rating a notch to AA+. Longer-dated Treasury yields rose Wednesday, with the 10-year Treasury rate
TMUBMUSD10Y,
4.105%
touching 4.07%, according to FactSet. Treasurys and other haven assets are viewed as likely to benefit from a flight to safety in a scenario where investors get more jittery about the U.S. economic outlook.

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August 2, 2023
How I Bootstrapped to $100 Million Without VC Funding | Entrepreneur

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Opinions expressed by Entrepreneur contributors are their own.

Venture capital (VC) funding has plummeted in 2023 due to high interest rates and less enthusiasm from investors. Research shows that VC funding almost halved globally in the first six months of this year, ushering in what some have called a VC winter.

Despite this, entrepreneurs shouldn’t give up hope of making their dreams a reality. Even though VC funding has slowed to a trickle, good ideas to launch a successful business have not.

You don’t have to immediately go into debt to start a business — I didn’t. All I had when I started was a phone, a computer and my own personal credit cards. I took my idea, ran with it, and now we’re bringing in over $100 million in annual revenue.

Of course, it’s always more ideal when you have the help, but there are ways to jump-start your business without VC funding, and I’ll give you some pointers.

Related: How This Entrepreneur Went Global Without VC Funding

Hit the reset button on all of your expectations

You don’t need a pile of cash to get started. In truth, there is some benefit to going at it alone. Without investors at your side pumping influence into your company, you have full control and less pressure from outside forces.

But the consequence of this is adjusting your expectations in the beginning to get things moving. After all, Steve Jobs lived in his parents’ garage for years while developing his computers.

Starting a business is a difficult undertaking and greatly affects your work-life balance and day-to-day comforts. When I started PostcardMania in 1998, I drove an old Nissan Pathfinder that was paid for (so I didn’t have a car payment), didn’t have a weekly salary, and I didn’t go on vacation. I worked very long days, seven days a week.

At times, it was difficult to pay for living expenses, so I negotiated repayment terms to cover bills and maxed out a credit card or two to get by. I even bartered a room in my home to get free childcare because I had two young children at the time.

I was funneling as much money as I could into PostcardMania, and once we had enough clients to get a building, I took money out of my own home to help pay for it. After about five years — once we finally reached eight figures in annual revenue — I finally decided to reward myself with a little luxury: a Mercedes convertible.

Everyone wants to skip the hardship and get to the part where they become a millionaire. Overnight success stories hardly ever happen though, so strap in and get ready for some challenges. The hard work will be worth it to reach your destination.

Related: You Don’t Need VC Funding to Grow Your Startup. Here’s How to Turn Customers Into Investors.

Market your business more than most people think is sane

Oftentimes, people look at large companies with huge ad budgets and think, “Well of course they spend a ton on advertising — they have the money to!”

What most people (even entrepreneurs) don’t realize is that those companies are spending big chunks of their revenue on marketing out of necessity, not luxury.

Another hard truth: Investing hard-won money in marketing doesn’t always result in huge returns. Any marketing strategy you use to generate leads, like Facebook advertising, podcast sponsorships or direct mail, is not 100% guaranteed to deliver results. It’s a constant, ever-evolving game of figuring out what is working and what isn’t.

That is one reason why many business owners are so reluctant to spend money on marketing services. It’s not a straightforward purchase like buying work boots or supplies.

You’re going to win some, and you’re going to lose some.

It takes time and effort to find that special marketing formula for your business that works and brings in revenue. This is also why it’s so important to invest in quality marketing services, stay consistent with it over long periods of time and test multiple methods all at once to see what works best.

The Chamber of Commerce, a research company for entrepreneurs, states poor marketing initiatives as the #1 reason for small business failure. I can confirm this throughout my 25 years of experience serving small business owners. The ones that thrive don’t give up on marketing. In fact, they spend insane amounts of their resources on it.

Related: Can You Scale a Startup Without Venture Investment?

Cultivate and maintain the best talent with a meaningful business purpose

Promoting my right-hand woman, Melissa Bradshaw, to president of PostcardMania was a huge moment for me. I remember when I first started my business — with her right there by my side from day one — she helped drive my kids to school and answer phones. Today, she’s buying large digital printing presses and establishing entire new departments in my company.

She’s the perfect example of why you need to focus on finding the right people and then allow them to grow into the roles they were meant to hold. Not only was Melissa a key person in helping me make my dream into a reality, she also paved the way for finding more people to join us and turn PostcardMania into the thriving business it is today.

Melissa has two key qualities that I look for in every employee at PostcardMania: willingness and ownership. Willingness to do whatever is necessary to get the job done and the desire to take full ownership of any task she took on. When you are building a business, you need to find people who not only have the right skills for the job but also passion for your purpose.

If you want your staff to take ownership, you have to offer them more than just a J-O-B, and you have to allow them the autonomy to make decisions necessary to get their job done. In addition to that, establish a purpose for your business that goes beyond offering the “the best” products or services. At my business, we sell marketing services, but our purpose is to help small businesses grow, because a strong small business class is a better economy for all of us. And we feel it! We love when our clients succeed!

We’ve focused on hiring people who believe in this purpose for years, and we recently reached an all-time high for retention.

Lastly, once you have those people, treat them like gold, and don’t be afraid to give them space for their own successes and failures. I’ve had my share, but they’ve made me into the person I am today.

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Joy Gendusa

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August 2, 2023
To Secure VC Funding, Your Pitch Deck Must Include These 5 Things | Entrepreneur

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Opinions expressed by Entrepreneur contributors are their own.

Venture capitalists are always on the lookout for the next big thing, and most of them review hundreds of decks monthly. Seasoned VCs need 30 seconds to decide whether the pitch deck is worthy and whether they should proceed and arrange a meeting with the founder.

If you’re an entrepreneur looking for VC funding, you need to understand what investors are looking for in a company before they decide to invest. Here are five things that should be in your deck, without which Leta Capital won’t invest in your company.

Related: Seeking Funding? Here Are Five Tips for Creating an Effective Pitch Deck

1. A clear and compelling problem statement in conjunction with the timing

First, you sell the problem, not the decision. The market need, not the product. VCs are looking for companies that solve real problems for real people. Your deck should clearly articulate the current state your company is changing, why it matters and then how you do it. The problem statement should be clear, concise and compelling. It should show that you’ve done your research and understand your target market. For example, Airbnb’s problem statement was: “People need affordable, safe, and unique accommodations when they travel.” This statement makes clear that Airbnb is solving a real problem in the travel industry. Moreover, people travel as much as ever before, so the timing was perfect.

2. Realistic projections and a scalable model

There is nothing worse than unrealistic and unprovable projections. If you claim that today you have $10k MRR and two customers, but next year you will make millions, and in 5 years, you will have an IPO, no one will believe you. You just don’t have enough data to convince people! Keep in mind that VCs want to invest in companies that can scale and generate significant returns on their investment. Your deck should show that you have a clear and scalable business model that can generate revenue and profit over time. That is why your traction, your business model and your projections should match.

3. Full focus and commitment from the founders

VCs want to invest in companies that have a strong team with a track record of success. But even more than that, VCs want to see the absolute commitment of the founders if we are talking about seed/series A stages when entrepreneurs need to work really hard and invest all the energy and time to boost their startup. Of course, the deck should show that you have a team with the skills and experience necessary to execute on your business plan. The red flag here is if you say that you need to raise money to hire a technical co-founder or lead engineer. In that case, VCs will think that you can’t attract and convince technical talent. You should figure out how to convince people to join you on your own — otherwise, how will you create a game-changing company?

Related: Five Best Pitch Decks of All Time

4. Competitive advantage and a POD among competitors

No competition? No market. You should admit that if the problem exists, someone is already solving it somehow. Don’t belittle competitors, and don’t say they are stupid (especially corporations or startups with a proven track record or huge funding). However, VCs want to invest in companies that have a competitive advantage over their competitors.

Your deck should show that you have a unique product or service that sets you apart from your competition. For example, Tesla disrupted the automotive industry by offering electric vehicles that were more environmentally friendly and had better performance than traditional gas-powered cars. Their competitive advantage and POD were their focus on innovation, sustainability and design.

5. A clear path to exit

VCs want to invest in companies that have a clear path to exit. Of course, investors don’t want to fund founders who haven’t built the company already want to sell it, but still, your deck should show that you have a plan for how investors can eventually make a return on their investment. This is an art, but nobody promised this would be easy!

If you’re looking to secure VC funding, your deck needs to show that you have chosen the perfect timing to solve a real problem, that you have a scalable business model executed by a strong and dedicated team, you have a competitive advantage, and your company will give an investor the desired returns after 5-10 years. By including these five things in your deck, you can increase your chances of securing the funding you need to take your company to the next level.

Related: How a VC Wants to Be Pitched

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Alexander Chachava

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July 24, 2023
U.S. bank lending holds steady in latest week

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The numbers: Commercial and industrial loans — a key economic driver — held roughly steady in the week ending July 5, the Federal Reserve said Friday. Loans rose $200 million to $2.754 trillion, the central bank said.

Bank lending has been slowly decelerating, falling for three straight months. C&I loans hit a peak of $2.82 trillion in mid-March, right before the collapse of Silicon Valley Bank.

Uncredited

Key details: Total bank deposits rose by $24.9 million to $17.367 trillion in the same week. Deposits have been shrinking slowly. They peaked at $18. 21 billion in mid-April.

Big picture: In the wake of the collapse of Silicon Valley Bank in March, economists have been watching the data carefully for signs of a credit crunch, as banks have weak balance sheets as a result of the Fed’s swift increases in interest rates since March 2022.

San Francisco Fed President Mary Daly said Monday she hadn’t seen credit tightening that is in excess of normal.

“I do think, from research literature, that this takes a while to show itself, and so I think we are still looking into the fall before we would have a declarative statement to make about the extent of credit tightening and the impact on the economy,” Daly said.

Market reaction: Stocks
DJIA,
+0.33%

SPX,
-0.10%
finished the week higher on Friday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.832%
rose to 3.83%.

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July 14, 2023
UnitedHealth stock bounces off 19-month low after earnings beat amid Optum strength, raised full-year outlook

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Shares of UnitedHealth Group Inc.
UNH,
-0.87%
jumped 2.7% in premarket trading Friday, to bounce off a 19-month low, after the health care services and insurance company beat second-quarter earnings expectations and lifted its full-year outlook, citing “strong and well-balanced” growth. Net income rose to $5.47 billion, or $5.82 a share, from $5.07 billion, or $5.34 a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of $6.14 beat the FactSet consensus of $5.99. Total revenue grew 15.6% to $92.90 billion, above the FactSet consensus of $90.75 billion, as UnitedHealthcare revenue rose 13.0% to $70.2 billion and Optum revenue increased 24.8% to $56.3 billion. Medical care ratio of 83.2% compared with 81.5% a year ago, and was just above the FactSet consensus of 83.1%. For 2023, the company lifted its adjusted EPS guidance range to $24.70 to $25.00 from $24.50 to $25.00. The stock, which closed Thursday at the lowest price since December 2021, has dropped 12.5% over the past three months through Thursday, while the Dow Jones Industrial Average
DJIA,
+0.14%
has tacked on 1.5%.

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July 14, 2023
S&P 500 ends above 4,500 level for first time in 15 months as stocks gain ahead of bank earnings

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Stocks rose for a fourth day in a row on Thursday, a day ahead of second-quarter earnings from America’s biggest lenders. The Dow Jones Industrial Average
DJIA,
+0.14%
rose about 46 points, or 0.1%, ending near 34,394, according to preliminary data from FactSet. But the S&P 500 index
SPX,
+0.85%
gained 0.9% to end at 4,509, clearing the 4,500 mark for the first time since April 5, 2022 when it ended at 4,545.86, according to Dow Jones Market Data. The Nasdaq Composite Index
COMP,
+1.58%
scored another blockbuster day, up 1.6%. Investors have been optimistic as inflation pressures ease and as perhaps the best-telegraphed U.S. economic recession in recent history has yet to materialize. The S&P 500 and Nasdaq have been charging higher on buzz about AI technology, with much of this year’s stock-market gains fueled by a small group of stocks. The risk-on tone ahead of earnings from JPMorgan Chase and Co.,
JPM,
+0.49%
Wells Fargo
WFC,
+1.04%
and Citigroup
C,
+0.63%,
had the U.S. dollar
DXY,
-0.74%
earlier on pace to end at its lowest level since early April 2022. Treasury yields also continued to fall, with the 10-year
TMUBMUSD10Y,
3.768%
rate back down to 3.759%, after topping 4% in recent weeks. The six biggest banks are expected to issue a deluge of fresh debt after earnings, despite the Federal Reserve having sharply increased rates and borrowing costs for businesses and households to tame inflation.

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July 13, 2023
Delta Air Lines stock surges to 2-year high after earnings beat, raised outlook

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Shares of Delta Air Lines Inc. surged toward a more-than two-year high Thursday, after the air carrier reported second-quarter profit and revenue that rose above forecast, and boosted its full-year outlook citing continued “robust” travel demand.

Delta
DAL,
-1.46%
said net income more than doubled to $1.83 billion, or $2.84 a share, from $735 million, or $1.15 a share, in the year-ago period.

Excluding nonrecurring items, adjusted earnings per share of $2.68 beat the FactSet consensus of $2.40.

Revenue grew 12.7% to $15.78 billion, well above the FactSet consensus of $14.44 billion,

For 2023, the company raised its EPS guidance range to $6 to $7 from $5 to $6, and increased its outlook for free cash flow to $3 billion from $2 billion.

The stock jumped 3.5% in premarket trading, putting it on track to open at the highest price seen during regular-sessions hours since April 2021.

“Consumer demand for air travel remains robust,” said Chief Executive Ed Bastian.

Traffic increased 18.0% to 60.80 billion revenue passenger miles while capacity grew 17.1% to 68.99 billion available seat miles. Load factor improved one percentage point to 88%, to beat the FactSet consensus of 87.2%.

The stock has run up 42.1% over the past three months through Wednesday, while the U.S. Global Jets exchange-traded fund
JETS,
-0.81%
has climbed 22.1% and the S&P 500 index
SPX,
+0.74%
has gained 9.3%.

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July 13, 2023
Dow scores best day in a month, stocks post back-to-back gains as investors await inflation update

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Stocks scored back-to-back gains on Tuesday as investors waited on an inflation update due Wednesday from the June consumer-price index. The Dow Jones Industrial Average posted a near 317-point gain, advancing 0.9%, to end near 34,260, according to preliminary FactSet data. That marks its biggest daily percentage gain since June 15, according to FactSet. The S&P 500 index closed up 0.7%, while the Nasdaq Composite Index gained 0.6%. Stocks have been on the upswing ahead of a key inflation reading for June, with consumer price index expect to show further progress in retreat from its peak above 9% last summer. The Federal Reserve has indicated it likely has a few more rate hikes on tap this year to help bring inflation down toward its 2% annual target. Investors also will be tuning into second-quarter earnings, which kick off in earnest later in the week with results from some of the nation’s biggest banks.

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July 11, 2023
Mullen Automotive’s stock more than doubles in 2 days. Here’s why.

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Shares of Mullen Automotive Inc. rocketed on massive volume for a second-straight day, after the electric vehicle maker announced plans to buy back a chunk of its shares.

The company
MULN,
+29.02%
said it believes its stock is “significantly undervalued,” given its current cash position of about $235 million. Therefore, the board of directors have authorized the repurchase of up to $25 million worth of its outstanding shares through the end of this year.

The buyback amount represents 17.1% of Mullen’s current market capitalization of about $145.8 million.

“We are initiating this buyback program as an attractive opportunity to deploy capital and return value to our shareholders,” said Chief Executive Officer David Michery.

The stock soared as much as 88.2% intraday, before paring gains to be up 32.8% in afternoon trading. Trading volume swelled to an already record 1.78 billion shares, compared with the full-day average over the past 30 days of about 205.0 million shares.

On Wednesday, the stock blasted 69.4% higher, the biggest one-day gain since it ran up 145.6% on Feb. 28, 2022, on then-record volume of 1.39 billion shares. That followed the company’s announcement that it retained a law firm to combat illegal naked short selling.

FactSet, MarketWatch

A short sale is a way for investors to bet that prices will fall. The short seller must pay to borrow stock owned by another investor so they can sell it with the hope of buying the stock back at a lower price. If the investor who originally owned the stock sells their stock, the borrower must cover their short so they can return the stock.

“Naked” short selling refers to the illegal act of shorting a stock without borrowing it first. While that is often blamed for what companies believe are unwarranted declines in their stock, market structure experts have often refuted those claims.

Read: Short sellers are not evil, but they are misunderstood.

Before the stock’s two-day bounce, it had closed Monday at a record low of 10.1 cents, even after the company reported last week that it recorded revenue for the first time, and that it received additional financing that put it in the “best financial position” in its history.

Mullen had said on Wednesday that it “believes it may have been” targeted by naked short sellers, and therefore decided to investigate any “potential wrongdoing.”

FactSet, MarketWatch

The latest exchange data showed that the percent of Mullen’s public float, or shares freely available to trade, that have been shorted was 16.2%, according to FactSet data. That’s less than half what the percentage was a month ago.

In comparison, fellow “meme” stock AMC Entertainment Holdings Inc.
AMC,
+0.94%
has 23.6% of its float shorted and 20.8% of GameStop Corp.’s
GME,
-4.48%
float is shorted.

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July 7, 2023
3 Secrets to Scaling Your Startup Effectively | Entrepreneur
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Opinions expressed by Entrepreneur contributors are their own.
Having worked as a corporate executive, entrepreneur and now venture capitalist, I’m often asked about the secrets behind scaling a startup. Ideally, every startup starts with innovative ideas resulting in unique products or services that customers are willing to pay for. Founders typically kick off with their funds, later relying on family, friends or angel investors to grow.

But what’s next? Let’s review some of the secrets I share with entrepreneurs to help them grow their startups effectively.

1. Start with a strong foundation

First of all, I recommend that startup founders test their ideas with potential customers. This could be through an interview, survey or by simply asking people what they think. Does it meet a critical need that customers have? Does it offer something unique that competitors do not? Are customers willing to pay for it?

During this process, entrepreneurs must be flexible in hearing feedback and adjusting their offerings to address it. In my experience, most startups start with fundamentally good ideas, but they need to listen to customers and adjust the product, service or price structure along the way.

Related: 4 Keys to Grow and Scale Your Startup

2. Seek out diverse partners

It’s challenging for startups to grow beyond their initial phase because it requires additional fundraising. Seeking investment forces entrepreneurs to fine-tune their business plans and articulate their startup’s value proposition. What is your unique selling proposition? How does your product or service set itself apart? How much are customers willing to pay? Making a compelling pitch deck is difficult, but ultimately it makes any entrepreneur improve their business plan.

I believe that diversity is critical in startup fundraising. Different types of investors offer different perspectives. Traditional VCs are proven investors, but in challenging economic times – such as now – they reduce the amount they invest. They don’t always conduct thorough due diligence and sometimes invest based on trends rather than research. Remember Theranos? Some startups aren’t as promising as they sound, and some turn out to be complete frauds. Other examples of poor investments or outright scandals include Ozy Media, Outcome Health, WeWork and Uber.

Corporate investors are smart for startups to consider. Corporations typically do not reduce investments during challenging macroeconomic times because they invest strategically. They want to make money, yet they also look for startups that align with their business and technology vision. Investing helps corporations become more innovative while offering startups rapid growth.

Related: 10 Things You Must Do Before Connecting With Investors

3. Working together results in success

Corporate investors offer unique benefits to startups and doing so helps improve their results. Let’s look at how this happens.
- Corporate Innovation: Startups make corporations more innovative. By investing, corporations find the most innovative ideas around the world without having to come up with them internally. It’s hard to drive internal innovation, but investing offers an effective alternative. Companies seek out the best entrepreneurs from around the globe, investing in their innovative ideas.
- Technology and business alignment: Due to their strategic alignment, corporate investors and startups can work together to develop products together and sell them to the same customers. A startup’s technology drives the corporation’s product or service growth, and vice-versa. I typically find this results in faster revenue growth for both parties.
- Unique advice: Corporate investors offer individual advice to startups since corporate managers and executives are sharing knowledge from their own first-hand experience. They have failed, succeeded, and discovered ways to grow. By offering this experience to the entrepreneurs they invest in, the startup founders get a shortcut to success.
- Valuable networking: Another way that corporations accelerate startup growth is to leverage their networks and offer introductions to partners and customers. This is typically more efficient than startups developing their networks. A corporation’s contacts have already proven themselves, so startups can often start working with these contacts immediately.
Related: How Startups and Investors Can Thrive in the Current Economic Environment

I anticipate that corporate investors will play a bigger role in startup investment. Traditional VCs may come and go, but corporate investors are in it for long-term, strategic reasons. Corporations increasingly rely on the Venture Capital-as-a-Service model instead of developing their own investment organizations. This outsources investing to an experienced VC partner, allowing the corporation to invest strategically at whatever financial level they choose. Doing so helps increase startup investments worldwide, ultimately benefiting the world through innovation.
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Anis Uzzaman

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July 3, 2023
The banking crisis has eased but a credit crunch still threatens the U.S. economy

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Financial disruptions in 2008 contributed to the deep economic downturn that came to be known as the Great Recession. Could recent bank failures similarly lead to a broad U.S. recession?

The $532 billion of assets of the three banks that failed in March and April 2023 exceed the inflation-adjusted value of $526 billion of assets of the 25 banks that failed in 2008. Yet the current situation differs in many ways from the underlying economic circumstances at the outset of the Great Recession.

Still, that experience, as well as others, show how financial distress can lead to macroeconomic weakness which then contributes to further financial distress, resulting in a downward spiral during which credit becomes tight, investment is curtailed and growth stalls.

Bank distress can have adverse consequences for borrowers and the broader economy. One source of recent U.S. bank vulnerabilities is the rapid increase in interest rates. Banks take in deposits that can be withdrawn in the short term and use them to make loans and invest in securities at interest rates that are fixed for some time.

As interest rates rise, the value of banks’ existing portfolio decreases as new investments at higher rates are more attractive. By one estimate, the U.S. banking system’s market value of assets is $2.2 trillion lower than suggested by their book value of assets accounting for loan portfolios held to maturity.

These book losses are realized if banks have to sell those assets to cover withdrawals from depositors. At the same time banks face challenges in maintaining deposit levels, depositors are less willing to place their money in low-return checking and savings accounts as higher-interest opportunities become increasingly available.

Banks that failed in 2023 have had specific weaknesses that made them particularly vulnerable. Silicon Valley Bank (SVB), for example, was particularly exposed to risk from rising interest rates as it had heavily invested in longer-term government bonds which lost market value as interest rates rose and its management failed to hedge against this risk.

SVB was also especially vulnerable to a run by depositors because over 90% of the value of its deposits exceeded the $250,000 amount guaranteed by the Federal through the Federal Deposit Insurance Corporation (FDIC). Depositors holding accounts in excess of this guaranteed amount, both individuals and companies (whose accounts were used for making payroll, among other reasons) are only partially protected in case of bank failure so they have an incentive to withdraw funds at the first sign of trouble.

Moreover, depositors were connected to each other through business and social groups, so news traveled quickly seeding the conditions for a classic bank run at Twitter speed. Signature Bank also had about 90% of its assets uninsured and its portfolio was heavily concentrated in crypto deposits. Both banks grew rapidly with inadequate risk and liquidity management practices in place and, while regulators had raised concerns about these risks, they had not taken more forceful actions to address them, according to a GAO report. Meanwhile, First Republic Bank, catered to wealthy depositors and for this reason also had a high share of uninsured deposits that made it more vulnerable to a bank run as its bond assets lost value amidst rising interest rates.

Commercial banks reduce lending when their deposits fall or when they otherwise cannot meet regulatory requirements. Deposits represent an important source of banks’ ability to lend. As a bank’s deposits decrease, it has less resources available for lending since other sources of funds are not as easily obtained.

A bank may also cut lending in an effort to satisfy regulations such as meeting or exceeding the Capital Adequacy Ratio. Regulators require banks to have enough capital on reserve to handle a certain amount of loan losses. The Capital Adequacy Ratio decreases when loans fail and the bank sees its loan loss reserves decline. The bank can then increase its Capital Adequacy Ratio by using funds that would otherwise be devoted to commercial loans or by shifting from loans to other assets that are less risky (such as government securities).

There is evidence that this effect contributed to the cutback in bank lending in New England in the 1990-1991 U.S. recession when there was a collapse in that region’s real estate market. A bank may choose to reduce lending if there are concerns about solvency even if it is not yet hitting up against the formal capital adequacy ratio requirement.

Read: San Francisco at risk of more falling ‘dominos’ as $2.4 billion of office property loans come due through 2024

A credit crunch occurs when borrowers who would otherwise receive loans are precluded from doing so because of a restriction on the supply of loans by banks. But a reduction in bank lending could also reflect a decrease in borrowers’ demand for loans.

Researchers have used a variety of methods to identify when there is a credit crunch rather than just a lower demand for loans. For example, a credit crunch could be identified through looking for differential borrowing, employment, and performance patterns by bank-dependent companies as compared to those that have access to financing through bond or equity markets. Bank-dependent companies are typically smaller than those that have access to other types of financing.

Credit crunches due to bank distress can undermine investment and economic growth. An early and influential analysis by Ben Bernanke, who went on to chair the Federal Reserve and served during the 2008 Great Financial Crisis, analyzed the effects of bank failures during the Great Depression. He found that bank failures had a particularly strong effect in reducing the amount of borrowing by households, farmers, and small businesses in that period, which contributed to the severity and duration of the Great Depression.

The U.S. banking system has been made more resilient since that time, but there is still evidence of the effect of a credit crunch on regional U.S. economies. The April 2023 IMF Global Financial Stability Report argued that a credit crunch in the United States could reduce lending by 1%, which would lower GDP growth by almost 0.5 percentage points.

Michael Klein is the executive editor of EconoFact. He is the William L. Clayton Professor of International Economic Affairs at The Fletcher School at Tufts University.

This commentary was originally published by EconoFact: Banks, Credit Crunches, and the Economy.

More: Justice Department to weigh updating banking competition rules

Also read: Senators make headway on clawing back pay from failed banks’ CEOs, as key committee advances bill

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June 28, 2023
S&P 500 scores best day in almost two weeks as tech shares march higher

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U.S. stocks jumped on Tuesday, with the S&P 500 scoring its best daily gain in almost two weeks as technology shares climbed and housing data pointed to continued resilience in the U.S. economy, despite the Federal Reserve’s sharply higher interest rates. The Dow Jones Industrial Average
DJIA,
+0.63%
rose about 211 points, or 0.6%, ending near 33,926, according to preliminary FactSet data. The S&P 500 index
SPX,
+1.15%
gained 1.1%, posting its best daily percentage gain since June 15, according to FactSet data. The Nasdaq Composite Index
COMP,
+1.65%
rose 1.7%. Stocks appeared poised to resume a tech-fueled rally that has the S&P 500 up 14% on the year so far and the Nasdaq about 29.5% higher. The S&P 500’s information technology sector jumped 2% Tuesday, while Communication Services rose 1.1%. Bolstering the tone, new home sales surged 12.2% in May, while the S&P CoreLogic Case-Shiller 20-city house-price index climbed in April.

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June 27, 2023
Creative Ways Startups Can Earn Funding in Tough Economic Times | Entrepreneur
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Opinions expressed by Entrepreneur contributors are their own.
In a declining economy, startups face an uphill battle when it comes to securing funding. Despite financial hardships, with resourcefulness, innovation and strategic planning, entrepreneurs can explore various avenues to obtain the necessary capital for their ventures.

Venture-backed startups have long been the bedrock of innovation, driving economic growth and shaping industries. In recent years, there has been a noticeable decline in the number of venture-backed small businesses. Let’s delve into the reasons behind this decline, exploring the changing landscape of entrepreneurship and the factors that have contributed to this trend:

Related: How to Access Capital in an Economic Downturn

Why startups are losing speed
1. Saturation of the market: One key factor contributing to the decline of venture-backed startups is the saturation of the market. The startup ecosystem has experienced an unprecedented boom over the past decade, leading to an influx of companies competing for funding and market share. With numerous startups vying for attention, venture capitalists have become more cautious in their investments, opting to support only the most promising and disruptive ventures. Consequently, startups are finding it increasingly difficult to secure funding, especially those operating in crowded markets.
2. Risk aversion and investor preference: In recent years, there has been a noticeable shift in investor preference towards late-stage and growth-stage startups. Venture capitalists are more inclined to invest in established companies that have demonstrated a solid track record of growth and revenue generation. This risk-averse behavior has resulted in reduced funding opportunities for early-stage startups, which typically require substantial capital injections to grow and scale. The scarcity of funding options has undoubtedly hindered the formation and growth of new ventures.
3. Changing regulatory landscape: Regulatory factors have also played a role in the decline of venture-backed startups. Governments around the world have implemented tighter regulations and compliance requirements in the wake of financial crises and scandals. While these measures aim to protect investors and consumers, they have inadvertently increased the barriers to entry for startups. Compliance costs and legal complexities have become significant hurdles for entrepreneurs, particularly those operating in heavily regulated industries such as fintech, healthcare and transportation. The burden of navigating complex regulatory frameworks has deterred many potential founders from pursuing venture-backed startups.
4. Alternative funding sources: The decline in venture-backed startups can also be attributed to the availability of alternative funding sources. Traditional venture capital is no longer the sole option for entrepreneurs seeking funding. Crowdfunding platforms, angel investors and corporate venture capital funds have emerged as viable alternatives, providing capital and support to startups. Additionally, the rise of initial coin offerings (ICOs) and blockchain technology has enabled entrepreneurs to raise funds through token sales. These alternative funding options have diversified the startup funding landscape, reducing the reliance on traditional venture capital and contributing to the decline of venture-backed startups.
5. Changing entrepreneurial landscape: The nature of entrepreneurship itself has evolved over time. With the democratization of technology, the cost of starting a business has decreased, making it easier for individuals to embark on entrepreneurial endeavors. This has led to a rise in bootstrapped startups and self-funded ventures, which may not seek venture capital funding at all. Furthermore, the gig economy and freelance work have attracted individuals who prefer independent work arrangements over building traditional venture-backed startups. The changing entrepreneurial landscape has shifted the focus away from venture-backed startups, contributing to their decline.
Although we have seen a decline in the number of venture-backed, it’s important to know that there are numerous other ways for startups to garner funding.

Related: Raising Funding in a Downturn Isn’t Impossible — I Did It (and You Can, Too).

Creative ways to earn funding

Below are several creative ways that startups can earn funding even in challenging economic times:
1. Bootstrapping and self-funding: One of the most accessible and immediate ways for startups to earn funding in a declining economy is through bootstrapping and self-funding. By leveraging personal savings, credit lines or personal assets, entrepreneurs can finance their ventures without relying on external investors. While bootstrapping may require sacrifices and careful financial management, it grants startups full control over their operations and minimizes the need to dilute equity at an early stage. Additionally, self-funding demonstrates commitment and resilience, which can attract potential investors in the future.
2. Strategic partnerships and alliances: Startups can explore strategic partnerships and alliances as a means to secure funding in a declining economy. By identifying synergistic organizations or established companies in their industry, startups can propose mutually beneficial collaborations. Such partnerships may involve strategic investments, joint ventures or co-development agreements, which provide startups with access to funding, resources, expertise and a broader customer base. These alliances can not only alleviate financial constraints but also enhance market credibility and pave the way for future growth.
3. Government grants and programs: Governments often offer grants, incentives and programs to stimulate innovation and entrepreneurship, even during economic downturns. Startups can tap into these resources by researching and applying for grants specifically tailored to their industry or innovative projects. These grants can provide much-needed funding, mentorship and networking opportunities. Additionally, government-backed programs, such as incubators and accelerators, offer access to valuable resources, expertise and potential investors, further aiding startups in their quest for funding.
4. Crowdfunding: Crowdfunding has emerged as a popular and effective funding avenue for startups in recent years. It involves raising capital from a large pool of individuals through online platforms. In a declining economy, crowdfunding allows startups to bypass traditional funding sources by directly appealing to potential customers, supporters and like-minded individuals who believe in their vision. By offering early access to products, exclusive perks or equity shares, startups can incentivize individuals to contribute to their fundraising campaign. Crowdfunding not only provides funding but also helps validate the market demand for a startup’s product or service.
5. Impact investment and social funding: In the face of economic decline, there has been a growing focus on impact investment and socially responsible funding. Investors and funds dedicated to making a positive social or environmental impact are actively seeking startups with a strong mission and purpose. By aligning their business models with social or environmental goals, startups can attract impact investors who are willing to provide funding in exchange for measurable social or environmental outcomes. Social crowdfunding platforms and impact-focused venture capital firms offer additional opportunities for startups to secure funding while making a positive difference in the world.
Related: Think You Need Venture Capital Backing to Start Your Business? Think Again.

While venture-backed startups have long been the driving force behind innovation and economic growth, their decline in recent years can be attributed to various factors. Saturation of the market, investor preference for late-stage companies, changing regulatory landscape, availability of alternative funding sources and a changing entrepreneurial landscape have all played a role. Despite this decline, entrepreneurship remains vibrant, with new models and funding mechanisms continuing to shape the startup ecosystem.

In a declining economy, startups must adopt creative approaches to secure funding for their ventures. Bootstrapping, strategic partnerships, government grants, crowdfunding and impact investment are just a few avenues that entrepreneurs can explore. By leveraging these funding sources, startups can mitigate the challenges posed by economic downturns and pave the way for sustainable growth and success.

As the landscape evolves, it is crucial for entrepreneurs and investors to adapt and embrace new opportunities to foster innovation and support the next generation of disruptors. Furthermore, entrepreneurs should remain adaptable, resourceful and open to exploring new opportunities as the economic landscape evolves.
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Michael Stagno

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June 27, 2023
Dow gives back earlier gains, stocks end lower after Russia’s brief rebellion

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U.S. stocks closed lower Monday, after Russia on the weekend was rocked by a brief revolt from the Wagner mercenary force. The Dow Jones Industrial Average
DJIA,
-0.04%
fell about 11 points, or less than 0.1%, ending near 33,715, according to preliminary FactSet data, giving up earlier gains in the final moments of trade. The S&P 500 index
SPX,
-0.45%
fell 0.4%, while the Nasdaq Composite Index
COMP,
-1.16%
closed down 1.2%. Stocks have been struggling to extend a recent rally driven by a handful of technology stocks that earlier in June lifted major indexes to their highest levels in more than a year. Investors and oil markets were on edge Monday after a brief mutiny in Russia over the weekend raised concerns about potential disruptions to global oil supplies. U.S. crude prices edged higher Monday, with West Texas Intermediate oil for August
CL00,
+0.53%

CLQ23,
+0.53%
ending slightly below $70 a barrel.

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June 26, 2023
AI Is Becoming a Game-Changer in Startup Fundraising | Entrepreneur

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Opinions expressed by Entrepreneur contributors are their own.

Navigating the world of startup fundraising can often feel like walking a tightrope, balancing a compelling pitch with hard data, all while trying to predict what investors want to hear.

The good news? Artificial intelligence (AI) is here to lend a helping hand, providing startups with an advanced toolkit to make informed decisions and craft persuasive pitches.

Related: Here’s How AI Is Changing VC Funding

AI in startup fundraising

AI, in the context of startup fundraising, refers to data-driven technologies that analyze patterns, predict trends and provide actionable insights. AI tools can help evaluate the potential of a startup based on various factors, such as market trends, competitive landscape and financial projections. These tools are increasingly being used by investors to inform their decisions and by startups to refine their strategies and pitches.

AI’s influence is not just limited to data analysis; it’s also creating a new frontier in how startups connect with potential investors. AI-powered platforms are transforming the traditional fundraising process, providing efficient, data-driven matchmaking between startups and investors.

The impact of AI on investor decisions

Investors have always used data as the backbone of their decisions, but with the surge of AI technologies, this reliance has deepened and evolved. AI is stepping up to reshape the decision-making process, offering advanced capabilities in areas that are key to investor deliberations.

Firstly, AI assists in examining a startup’s financial data more thoroughly. AI algorithms can quickly sift through vast amounts of financial data, decoding patterns and identifying insights that might be less obvious otherwise. This results in an in-depth understanding of a startup’s financial position, which is fundamental for investors.

Secondly, AI is invaluable in evaluating potential market growth. By utilizing machine learning and predictive analytics, AI can anticipate market trends and growth with superior accuracy. This helps investors gain an insight into the scalability of a startup and its potential to claim a share of the market.

Thirdly, assessing the competitive landscape is another domain where AI’s prowess shines. With AI, real-time insights into the strategies and market positions of competitors can be gleaned, helping investors understand where a startup stands in its market, and its capacity to endure competitive pressures.

Finally, AI helps in predicting a startup’s success by comparing it with similar businesses. By drawing on data from businesses with comparable models, AI can estimate the potential risks and returns of investing in a startup. This can be crucial for investors in determining the future trajectory of a startup.

Related: 5 Things That Have Changed in Startup Pitching This Year

How AI can help startups with fundraising

Artificial intelligence is not just a powerful tool for investors; it’s also a transformative force for startups, particularly in the fundraising landscape. Here’s how AI can help startups raise the necessary capital:

AI can guide startups in developing a data-driven pitch, harnessing the power of predictive analytics to illustrate potential growth and returns. For instance, by analyzing market trends, competitors and customer behavior, AI can furnish startups with the knowledge needed to craft a compelling, evidence-backed argument for their business.

Furthermore, AI can take a startup’s financial modeling to the next level. Leveraging machine learning algorithms, AI can predict future revenue streams and cash flow with a degree of accuracy that’s traditionally been hard to achieve. By doing so, it generates a realistic, granular picture of the business’s potential — something that’s crucial for both the startup seeking funds and the investor looking to allocate capital wisely.

The insights gleaned from AI not only support the crafting of persuasive pitches but also inform strategic decisions, help identify growth opportunities and potentially foresee challenges. Thus, AI’s role in startup fundraising is multifaceted, offering key support in the journey from early-stage venture to successful business.

Matchmaking with investors

AI-powered platforms, such as Crunchbase or AngelList, serve as efficient matchmakers between startups and investors. These platforms leverage AI to analyze various factors — the startup’s business model, industry sector, and fundraising stage, among others — to identify and connect with the investors best suited to a startup’s unique needs. This advanced matching capability helps to streamline the fundraising process, increasing its efficiency and effectiveness.

Beyond initial introductions, AI tools can also assist startups in maintaining robust relationships with their investors. They can automate the process of providing regular updates, tracking critical performance indicators and even forecasting potential issues. This constant communication loop not only keeps investors informed but also nurtures trust and transparency between the parties involved.

Related: 6 Ways To Raise Capital For Your Startup In 2023

Pitching to AI-savvy investors

In the contemporary AI-driven era, it’s crucial for startups to know how to effectively pitch to AI-informed investors. This isn’t just about demonstrating an understanding of AI’s technical aspects. It also involves clearly articulating its impact and relevance to their business.

Startups must show that they grasp how AI can transform various aspects of their operations. This may include improving efficiencies, optimizing customer experiences, streamlining processes or driving innovation. The ability to comprehend and communicate the potential implications of AI can prove to be a game-changer in gaining an investor’s interest and confidence.

Moreover, startups should underscore how they are already utilizing AI to bolster their operations and spur growth. Concrete examples of AI applications in their business strategy not only indicate a startup’s tech-savviness but also its ability to stay ahead of the curve. This can be particularly appealing to investors who are always on the lookout for businesses that leverage cutting-edge technologies to gain a competitive edge.

In the rapidly evolving startup ecosystem, AI is a potent tool, offering a competitive edge in fundraising. It empowers startups to make data-driven decisions, tailor their pitches and connect with the right investors. But as with any tool, its effectiveness depends on how well it’s used.

As such, startups need to invest in understanding AI and incorporating it into their fundraising strategy. This involves not just leveraging AI tools but also developing an AI-literate team and an AI-friendly culture. This way, startups can use AI not just as a tool for fundraising, but as a driver of innovation and growth.

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Yan Katcharovski

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June 26, 2023
Dow ends nearly 250 points lower, stock-market rally pauses ahead of Fed testimony

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U.S. stocks closed lower on Tuesday, the first day of trading after the long federal Juneteenth holiday. The Dow Jones Industrial Average
DJIA,
-0.72%
fell about 245 points, or 0.7%, ending near 34,053, while the S&P 500 index
SPX,
-0.47%
closed about 0.5% lower and the Nasdaq Composite Index
COMP,
-0.16%
shed 0.2%, according to preliminary FactSet figures. Stocks were lower to start the week, after the S&P 500 on Friday booked a fifth straight week of gains and stocks recently touched their highest level in more than a year. Investors were waiting on Federal Reserve Chairman Jerome Powell’s congressional testimony on monetary policy, which kicks off Wednesday, for more insights into the central bank’s thinking on interest rates, after senior officials penciled in two more potential hikes this year, while skipping a rate increase at its June meeting.

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June 20, 2023
Stocks end mostly higher after Fed skips June rate hike but pencils in more this year

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U.S. stocks finished mostly higher on Wednesday in a choppy session that saw the Fed leave rates steady in June, while penciling in another 50 basis points of potential hikes later this year. The Dow Jones Industrial Average DJIA shed about 231 points, or 0.7%, ending near 33,980, according to preliminary FactSet data, or well off the session’s low of 33,783. The S&P 500 index SPX added about 3 points, or 0.1% and the Nasdaq Composite Index COMP closed 0.4% higher. “It’s just the idea that were are trying to get this right,” Fed Chairman Jerome Powell said about the potential mixed messaging of holding rates steady in…

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June 14, 2023
Nasdaq stock dives after deal to buy Adenza for $10.5 billion in cash and stock from Thoma Bravo

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Shares of Nasdaq Inc.
NDAQ,
+0.28%
dove 5.1%, enough to pace the S&P 500’s premarket decliners Monday, after the securities trading, clearing and listing company announced an agreement to buy software company Adenza for $10.5 billion in cash and stock from Thoma Bravo. The terms of the deal include $5.75 billion in cash and 85.6 million shares of Nasdaq common stock, which will be issued to the owners of Adenza after closing of the deal, expected to occur within six to nine months. The number of shares represents 17.4% of Nasdaq’s shares outstanding. Nasdaq plans to issue 5.9 billion of debt for the cash portion of the deal. “With Adenza, we will have a more complete suite of essential software and technology solutions that make managing risks and complying with regulations simpler and more efficient for our clients,” said Tal Cohen, president of market platforms at Nasdaq. Adenza is expected to have $590 million of revenue in 2023, with annual recurring revenue growth of 18%. Nasdaq’s stock has lost 5.7% year to date through Friday, while the S&P 500
SPX,
+0.11%
has gained 12.0%.

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June 12, 2023