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Tag: Investments

  • The Financial Literacy Basics Entrepreneurs Need to Know | Entrepreneur

    The Financial Literacy Basics Entrepreneurs Need to Know | Entrepreneur

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    Like most of you, I grew up with virtually no formal training on money. I learned that we definitely need money to get the things we want and one way or another, we have to work for it. Short of getting my passbook savings account back in the ’80s, I was taught very little about how to be financially literate.

    What happened? I got a job, paid bills, saved a little (but not really) — and then, when I got to college, I went into credit card debt in exchange for a free T-shirt. By not getting the proper education on money, it controlled me instead of the other way around. We all know how that feels! But it doesn’t have to be this way. Financial literacy won’t happen by accident; it happens by design.

    Money, for most of us, can be a double-edged sword. Some days we are in love with making it, some days we dread having to work to get it. As a dad, CFP and fintech entrepreneur, I’ve learned that a high level of financial literacy is key to one’s success. To have a great relationship with money, we must understand what it is, how to use it and how to manage our risks when we use it — so here’s what you need to know.

    Related: ‘Financial Illiteracy’ Cost Americans an Average of $1,819 in 2022 — Here Are The Most Common Mistakes People Make

    Understanding money

    Money is a tool. It helps us accomplish what we want and need in life and business. We all have a relationship with money, and how it manifests itself through our spending is based upon our financial literacy — or lack thereof.

    The first step for increased financial literacy is to understand that money is a tool created out of an idea and need for us to exchange things of value, be it goods, services, etc. You don’t want more money — you want more of what it does for you.

    So how do you understand money? Understand how you spend it by mastering your cash flow. Show me how and where you spend your money and I can tell you if you understand it or not and what’s important to you. Knowing your cash flow helps you understand what you actually do with your money which can be very insightful and helpful on how best to use your money. I didn’t understand money or my cash flow at all after graduating college, but I eventually mastered it by creating and using a simple yet robust cash flow worksheet. This will help you learn how to properly use money.

    Using money

    Money should be thought of as a tool of precision that can help us accomplish whatever it is we want. We earn money by doing or creating something of value. But what are you using your earned money for? Once you understand your current cash flow situation, you can assess some simple yet important things. Are you cash flow positive every month? If not, why? Are you spending (using) money on mainly assets or expenses? Assets ultimately put money in your pocket, while liabilities (expenses) take money out.

    Once you understand your money and where it’s currently going, you can leverage this information into how best to use your money. Instead of spending X dollars a month on coffee every morning, which can easily add up over time, what if you took that money and used it on something that made you money? You could spend it on marketing your business, investing in a savings plan, paying down debt and so on.

    Taking it a step further, you can now determine the ROI on where you’re using your money. If you’re paying down debt faster with your excess cash flow, you’re saving interest — and that’s real money. Investing your excess cash flow into marketing your business and seeing increased sales because of it? Now you have a direct correlation with what happens when you understand and use your money.

    A best practice is to balance how you use your money. There’s nothing wrong with spending some of your money on things that you want, but it also makes sense to deploy your money into things that can work for you. Where will your money work hardest and best for you?

    Related: We Owe it to Consumers to Foster Financial Literacy

    Managing risk with money

    Virtually everything in life has some level of risk. Risk is basically uncertainty about the future. When it comes to our finances, whether it’s personal or business, we have an opportunity to protect ourselves against uncertainty and manage risk. As an entrepreneur, we are prone to and arguably seek out risk since we know it can lead to a lot of rewards, but that doesn’t mean that we should blindly take on risks and just hope for the best. Planning for the worst and hoping for the best is a sound practice to help manage your risk.

    Some simple guidelines to manage risk with your money are:

    • Spend less than you make (positive cash flow).
    • Keep a solid cash cushion liquid in case of emergency; somewhere between 6-12 months of your expenses from your cash flow worksheet.
    • Consider appropriate types of insurance to protect against large but unlikely risks like death, accident, illness, security, etc.
    • Don’t invest all your capital into one thing, and with any investment you do make, ask yourself first, “What happens if I lose every penny of this investment?” If you don’t like or can’t live with the answer, then it’s probably too much risk for you.

    If we know what money is, how to use it and how to manage risk with it, we end up empowering ourselves to be the master of not only our money but — to an extent — our future. Life happens and curveballs will fly, but controlling these variables to the extent we can gives us a much better chance of being successful with our money.

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    Derek Notman

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  • 2 Steps to Predict the Future of Your Business | Entrepreneur

    2 Steps to Predict the Future of Your Business | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Have you ever thought about the future success of your business? Have you ever wished you could predict what will happen next year based on the decisions you are making today?

    What if you could look at your business 12 months from now based on those decisions? What if I told you that you could see the future and have the ability to predict what is going to happen? Well, I have good news for you. As a part of a franchise system, you have a unique ability to time travel in your own business!

    Two things can make this happen.

    Step #1

    The first is what we call historical pattern recognition. This is the analysis of historical data from your Profit and Loss Statement (P&L). This analysis is done on a line-item basis of every variable and fixed cost in your P&L, as well as the revenue stream and net profits over a 12-24 month time frame.

    By analyzing this data, we can identify the 8-10 critical metrics driving your business. This data is then used to create a pattern of numbers based on your history.

    A simple explanation of pattern recognition works like this. I used this example in a keynote speech to a franchise organization at their annual convention in Nashville last year. I told the audience that I had two examples of tracking a set of numbers in the previous nine days and wanted to see if they could predict the following number in the pattern.

    Related: 3 Ways Your Past Wins Are Blocking Your Future Successes

    In the first example, I gave them the number 44. I then asked the audience, “Given that number, can you predict, with any level of accuracy, what the next number in the data set will be tomorrow?” The obvious answer was no. There just isn’t enough data.

    In the second example, I told them that over the last nine days, I had tracked the numbers 1-2-3-4-5-6-7-8-9. Now I asked them to predict the next number that would come up tomorrow. In this example, they all got it right. The obvious answer is 10.

    Not only did they get it right, but there is a high probability of that number being accurate. The entire audience just traveled to the next day and predicted what would happen. This is what we call basic pattern recognition. With enough data, we can figuratively time travel to the future and predict with a fair level of accuracy what will happen.

    Related: Why an Entrepreneur’s Ability to Innovate Will Make (or Break) Future Success

    Step #2

    The second step in time travel is unique to a franchise system. This is what we call the “collective knowledge” of the franchisor. This is a potent tool for predicting the future results of the decisions you make today.

    Let me break this down. Before the speech I just spoke about, I had requested and been given six P&Ls from different operators within the system.

    I got two from their top operators. I got one from a middle-of-the-pack operator, one sample data set the franchisors use in training, and two from lower-performing units. I then lined these up and did a line-item analysis of the past 24 months.

    What we found out was that most of the metrics were very similar. (With a few one-off exceptions). Two units were profitable and growing. One was profitable but with no growth, and two were stagnant and not increasing sales. Of the two units without growth, one was breaking even, and the other was losing money.

    The one glaring difference between the units that were growing and profitable, those that were stagnant and finally, the ones that were losing money was the amount and percentage of money spent on marketing. There was a stark contrast between the units.

    I then took the marketing dollars spent by each unit and showed both the short-term and the long-term return on investment from their marketing spend. The top operators were earning up to $15 in revenue for every dollar spent. This was enough to cover the natural attrition of current clients and acquire enough new clients for growth. The middle-of-the-road operators were getting around $10 in revenue for every dollar spent but only covering enough new sales to make up for the natural attrition of clients. That meant they were stagnant in revenue and profits. The bottom units were generating around $5 in revenue per dollar spent but were not spending enough marketing dollars to cover their client attrition rates. This resulted in declining revenue and profit losses.

    Related: How to Reduce What You’re Spending on Marketing (Without Losing Results)

    What we learned in this exercise was interesting. The top units were spending around 8% on marketing. The bottom units were around 4%. The only real difference in revenue and profits between these units boiled down to about 4% additional spending on marketing. A 4% difference in spending was the difference between profitable growth and stagnation to losses.

    This exercise allowed us to look at each unit from a historical pattern recognition perspective and then combine it with their decision-making around marketing spend and determine what the future revenue and profits of the units would look like.

    At this same event, I asked the crowd if they would like the opportunity to have a one-on-one with the top operators in the system to ask questions about sales, expenses, growth and profit. Almost every hand went up. At this point, I told them that they had that opportunity through the use of their FBCs (franchise business consultants) assigned to their territory.

    These FBC have all the information available on every unit within the system. They have all the data from the top units down to the ones that are not making money. They have the data to do the comparative analysis. In essence, they have the keys to the kingdom. They know the answers to all the questions. They know what works and what has been tried and failed. This is not a guess. This is something they have experienced and learned. This is the power of the collective. The historical decision-making of hundreds or thousands of franchisees is the power of franchising. Every good decision and every bad decision is available to be learned from.

    As a rule, business success is not about having all the answers. Success is about asking the right questions. The power of the franchise system is that they have the answers to the questions. They already know what decisions will work and what decisions will fail. Your job as a franchisee is to ask questions. But here is the key: when you ask a question and get an answer, you need to follow the answers you get.

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    Brian Will

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  • 4 Reasons Why Investing in this Niche Industry Will Make You Money | Entrepreneur

    4 Reasons Why Investing in this Niche Industry Will Make You Money | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Investing in emerging music artists might be the perfect opportunity if you’re looking for an innovative and rewarding move to diversify your portfolio.

    The music industry has always been a lucrative and exciting space for investors. Music can captivate an audience, evoke emotions and inspire us in ways no other art form can. Putting money into emerging musicians is an opportunity to get in on the ground floor and potentially reap large returns, thanks to the power of discovery.

    Whether you’re a music industry veteran, a fan, or just someone looking for a savvy investment, investing in emerging musicians will diversify your financial portfolio and have fun doing so.

    Here are the top benefits you can expect from investing in emerging music artists.

    Related: 3 Key Entrepreneurial Lessons I Learned While Working for P. Diddy and Bad Boy Entertainment

    1. Passive income with unstoppable growth

    Investing in emerging music artists is a great way to generate passive income with unstoppable growth. You may have never thought this way, but every time you hear the most overplayed song, its songwriters and artists get a payout.

    Luckily, the power of the internet and the ever-changing landscape of the music industry has made it easier than ever to find and invest in upcoming music talent. Simultaneously, new artists have more possibilities to reach a larger audience and build a successful career with the rise of streaming services like Spotify. That’s why investing in emerging music artists is such an attractive option.

    Once an artist has established themselves and their music is being streamed or purchased, they can begin to generate revenue — and you’ll get a share of the profits. Music royalties can also bring in a consistent stream of income and potential performance royalties.

    Investing in emerging music artists is your chance to enter the protected asset class in a market known for record-high content creation and exponential growth. The music industry seems to have finally found a technology-based model that works for artists, consumers, and businesses.

    As an investor, you can use your influence to help your favorite artists grow and become successful. For example, you can introduce them to new contacts, help them with their marketing strategies, and generally be a support system—and yield great rewards in return.

    Related: Rise Above The Noise: 5 Tips to Stand Out as an Independent Artist

    2. Larger return on investment

    The music industry is constantly evolving, so investing in emerging music artists can be a great way to stay ahead of the curve and capitalize on new trends. With this approach, you can get in on the ground floor of a potential breakout and enjoy a larger return on your investment than if you had waited until the artist was an established star.

    Investing in an artist early can help them develop their sound and build their fan base while also financing their career. This can result in a much bigger pay-off down the road.

    Emerging music artists often have the potential to become superstars, and when they do, their music sales and streaming figures can skyrocket. Ultimately, the return on your investment could be significantly higher than that of more established artists.

    3. A true sense of fulfillment

    Investing in emerging music artists isn’t just about money. It is an excellent way to support the career of an artist you truly believe in and help them reach their full potential.

    When you invest in emerging music artists, you help create a platform for them to share their music with the world. You give them a chance to be heard and make a real impact in the music industry. You are ultimately enabling them to make a living doing something they love.

    As such, it’s safe to say that investing in music can be an act of true passion and advocacy. The experience can be incredibly rewarding, as you can be part of an artist’s journey and watch them grow and develop their art. It’s a great way to support the arts, help new artists get their start and contribute to shaping the future of the music industry. It will give you a feeling of pride and satisfaction that goes beyond any financial gain.

    Related: The Benefits of Investing in Talent: How It Impacts the Music Industry and Beyond

    4. Portfolio diversification

    With the new wave of digital music streaming and the ever-evolving music industry, more and more individuals and businesses are looking for ways to diversify their investments and maximize returns.

    Investing in emerging music artists offers a unique opportunity to do that. It can provide a great hedge against market volatility, opening the door to interesting diversification opportunities.

    For starters, you can benefit from the financial growth of your chosen artist. As the artist’s visibility and success increase, so does their financial value. This means your investment can grow alongside the musician’s success, generating a steady and reliable income stream.

    More importantly, investing in emerging music artists can provide you with a level of diversification that other investments may not offer. Music is an ever-changing and ever-evolving industry, so the success of any one artist can be unpredictable. By investing in different music artists, you can spread the risk across multiple assets and ensure that if one artist fails, the other investments will provide you with some support.

    The bottom line

    As the music industry continues to expand and evolve, so do the opportunities for investors to benefit from the success of up-and-coming artists.

    Investing in emerging music artists can be a smart move for investors looking to reap the rewards of a growing industry. Not only can investing in music be lucrative, but it can also be a great way to support and empower the artists you believe in.

    In addition to diversifying your portfolio and getting involved in something you are passionate about, you can get in on the ground floor of a potentially lucrative venture.

    That said, successful investment in music talent requires having a good understanding of what’s hot and what’s not, along with a keen eye for potential. Any individual or entity looking to make their first investment in an up-and-coming music artist must perform a risk analysis and determine an ideal time horizon, meaning how much they can safely invest and how long they’ll be willing to get a return.

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    Eric Dalius

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  • Do You Know How to Make Your Real Estate Investment Last? | Entrepreneur

    Do You Know How to Make Your Real Estate Investment Last? | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Everyone knows that location is a critical factor when it comes to investing in real estate. Purchasing any property requires a litany of considerations and due diligence before any assets or resources can change hands, but the location is paramount.

    Neighborhoods with low crime rates, excellent school systems and up-and-coming communities are the regions where property values tend to increase at the highest rates. When you make an investment into a hot new part of town or a city that offers stability and growth, these neighborhoods are far more appealing and the price tags for both sales and rentals tend to reflect the high desirability of these locations.

    Location isn’t just about the dwelling itself, it’s about the positive growth of the surrounding areas in which your real estate is located and the trends that demonstrate an upswing in the contributions of the community at large that make the area more desirable. Hopefully, those trends continue on an upward trajectory to make your investment a profitable one.

    Related: 5 Proven Steps to Become a Real Estate Millionaire, According to an Investor

    Improving value

    Whether it’s the purchase of a standalone home or buying a rental property, you want the value to increase over time. When that happens, you can sell the home for more than you initially paid for it and rental prices can rise as residences in the area become more valuable. That return on investment is the goal for homebuyers and property owners who are looking to develop some passive income channels.

    But the important thing to remember is that your value is not determined by the physical dwelling in which you or your tenants reside. Buildings depreciate over time and renovations require more investment of capital. The greater impact on improving the value of real estate is the cost of the land and the community surrounding it.

    That’s right, the lot upon which you’ve built that house or apartment complex is where the value really lies. A gorgeous home or brand new building in a community that is otherwise depressed or rundown tends to suffer in a resale or setting the price for rent. Why is that?

    It’s due to the very simple and obvious fact that people don’t want to live in a neighborhood that doesn’t have a lot to offer in terms of a safe, functional and welcoming community. In big cities, there are so-called “good” blocks and “bad” blocks. One area may be safe, while another just a few blocks away may be infamous due to a higher crime rate and a slew of empty storefronts with “For Lease” signs in the windows. It makes you wonder why those businesses have left the area and buyers and renters alike may also decide it’s time to look elsewhere when choosing a place to call home.

    Related: Market Knowledge Is Vital In Making Efficient Real Estate Investment Decisions

    The importance of community

    When a region becomes more attractive to homeowners and prospective tenants, the value of your real estate increases. Some locations offer stability in terms of increased value because they are situated in a community that isn’t likely to see any major shifts in the future.

    A good example of this is a college town. The institution around which these neighborhoods are situated is highly unlikely to move, shut down or suffer any real significant, negative changes any time soon. This is particularly true in towns where the college or university has been in existence since the 1700s. We know that the school isn’t going to suddenly relocate, we know that the school will offer admission to a limited number of applicants and the students, faculty and administrators will need a place to live, eat, work and play when classes are not in session. Therefore, these communities are going to be bustling and popular, safety will be a priority and homes and apartments will be in demand.

    The only thing to consider that might be a negative is the seasonal aspect of buying real estate in or near a college town. Students and faculty may leave for the summer. But it’s just a three-month shift and when everyone returns in the fall, the community returns.

    Real estate and renovations

    Don’t get me wrong, it’s important to maintain the asset that sits on the plot of land you own. A shoddy apartment building or a home that’s falling apart are depreciating assets that can also bring down the value of the neighborhood as a whole. Buyers and renters know they can find somewhere else to go. If enough homes and buildings start to look dilapidated or neglected and desperately in need of repair, people tend to migrate away from these areas.

    One vital way to keep the value of your investment from falling is to make the repairs you need to make as soon as you can make them. A highly desired location can make some potential buyers or renters overlook the less-than-perfect condition of the dwelling because they can live, work and play in a hot neighborhood. But location is key for getting them to make the deal. Depressed areas will drive them away. It’s tougher to move a tract of land than to demolish a dilapidated home or dwelling.

    So you can do your part by keeping your property values up and helping the neighborhood thrive by maintaining what you own. New homes and businesses move into the area and the cost of your home and the land on which it stands goes up.

    Related: 7 Tips for Managing Your Real Estate Business Like a Pro

    Wrapping up

    Land can become a premium commodity when there isn’t enough of it to go around. Choosing a location that is desirable and fully developed means that space is at a premium, with prices to match when people want to live in that area. This is true in the big metropolitan cities and even smaller, more rural towns. When there is room to expand, prices tend to be lower. Location matters and when there is less of it to go around, people are willing to pay for what’s available because it may not be available for very long.

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    Ari Chazanas

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  • How to Identify a Good Investment (Even During Economic Uncertainty) | Entrepreneur

    How to Identify a Good Investment (Even During Economic Uncertainty) | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Rising inflation. Ongoing supply chain problems. International conflict.

    There’s a lot of volatility in the market today, which has many entrepreneurs and investors feeling stressed. With this much uncertainty, choosing how to allocate money and being confident in those choices can be challenging. Too often, people get trapped in analysis paralysis or needlessly lose sleep second-guessing themselves.

    One of the best ways to ease that stress is to take the emotion out of your decision-making. And the best way to take emotion out of the equation is to establish a clear set of investing criteria. By knowing precisely what a good investment looks like, you’ll be able to make wise decisions quickly, efficiently and confidently, no matter what else is happening in the world.

    Related: Why the Current Volatile Market is an Opportune Time for Impact Investing in Undercapitalized Entrepreneurs

    Step 1: Understand who you are and what you want

    Investing is not a one-size-fits-all process. An excellent opportunity for you may not be great for someone who doesn’t share your interests, risk profile and goals. This means establishing your investing criteria begins with introspection.

    Spend time answering the following questions:

    • What kind of lifestyle do you want your investments to fund? The answer to this question will help you begin to create accurate financial targets.
    • Are there certain types of assets you enjoy more than others? Some people love buying and managing real estate, while others prefer commodities or currency. Some people are deeply involved in a single business, while others enjoy the thrill of serial entrepreneurship.
    • How do you feel about using leverage? The extent to which you’re willing to use borrowed capital as a source of funding will impact the types of investments that make it onto your preferred list. Strategically using leverage can dramatically increase your opportunities to generate returns, but this technique isn’t a good fit for everyone.

    Step 2: Use the tax law to your advantage

    I always tell my clients: The tax law is a series of incentives. It is the government’s way of telling you what it wants you to do, and when you listen, the government is willing to invest with you. So, while there are a lot of investments that will increase your taxes as you earn more money, there are some excellent options that the government is so excited to have you make it is willing to reduce or even eliminate your taxes.

    How does this work? Governments around the world recognize their societies are better off when businesses and private citizens invest in things like creating jobs, building housing and growing food. So, they create tax incentives to promote these investments.

    I recently wrapped up an in-depth study of these incentives in the U.S. and 14 other countries and identified seven categories of investments that every government supports. The categories are:

    • Business
    • Technology, research and development
    • Real estate
    • Energy
    • Agriculture
    • Insurance
    • Retirement savings

    Which of these categories matches the criteria you established in step 1? Spend time learning more about what incentives the government offers to investors in the categories that interest you most. When you use these incentives, you’re putting yourself in a position to build wealth faster by decreasing the amount of money you’re paying in taxes.

    Choose the category that fits you best. Then, double down on your research. Ideally, you will become narrowly focused on a specific niche within your chosen category. The more you learn about a specific investment and the more focused you become, the more you will increase your expertise. The greater your expertise, the lower your risk.

    Related: 7 Best Types Of Investments In 2023

    Step 3: Make a checklist

    Now that you have clarified what you’re looking for in an investment and identified the tax-effective categories in which you’ll invest, you can finalize the specific criteria you’ll use for evaluating each option. Your goal is to create a detailed checklist that lets you quickly and confidently determine which investments suit you best. Once you have established this framework within your investing niche, you’ll be able to scale your investment process.

    Your list should include the prospective investments:

    • Target rate of return
    • Expected cash flow
    • Leverage requirements
    • Exit strategy
    • And, of course, tax repercussions

    Creating this framework isn’t a black-and-white task. Your goals, circumstances and values will determine what makes an investment a good fit for you.

    You absolutely can and should do this work with the support of your CPA and other financial advisors. They can help you navigate the technical requirements on the tax side and make more precise financial estimates. Having the right team in place, alongside a proven wealth and tax strategy, serves as extra protection from making poor choices in high-stress situations.

    At the end of the day, you’ll have the peace of mind that comes from knowing you are making investment decisions based on where you are in life, where you want to go and how you’d like to get there. Plus, when you build your investing strategy in connection with your tax strategy, you’ll be able to make more money, more quickly and pay fewer taxes at the same time.

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    Tom Wheelwright

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  • How Startups Can Navigate Uncertainty, AI and Investing in 2023 | Entrepreneur

    How Startups Can Navigate Uncertainty, AI and Investing in 2023 | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Through every turn of the century, there was a rotation of what the “It” industry was. The first agricultural revolution gave birth to the first reminiscence of modern society. In the 1800s, there were industrial machines. The internet dominated the late 1990s and has continued to make its mark until the present day. Today, we’re witnessing an unprecedented era where tech stocks are at an all-time low — more than 20% was wiped from the NASDAQ last year, and nearly $3 trillion of the S&P 500’s market cap drop was from the tech sector.

    Can this be the fall of the short-reigning “It” industry?

    Simultaneously, a flurry of activity and media has flocked toward the growth of nascent AI technology, such as Open AI, which has surpassed a whopping 57 million monthly users for its product, ChatGPT. Since then, AI wars have ensued between Google and Microsoft in the race to develop superior AI.

    The rapid advancement of AI will inevitably change how the modern workforce operates, but what does that mean for the overall fundraising landscape? Despite the lower fundraising rates compared to previous years, entrepreneurs still have opportunities to capitalize on this unique period.

    Related: Building a Business? Here Are 4 Common Challenges You’ll Likely Face Along the Way

    Funding slows, but not at a halt

    Despite a sluggish funding period, investors managed to put $100 billion more into tech than in 2020, according to Crunchbase data. Venture capitalists will continue to fund companies with long-term value based on quantifiable measures. This also means that requirements will tighten around seed funds and up; you’ll see less hubris in the market compared to Covid days.

    Although fundraising has slowed, exits and mergers and acquisitions have skyrocketed. With exits increasing by 116%, it shows the natural gravitation of startups toward more stable companies in uncertain periods. It’s also an opportunity for investors and companies to buy startups at a discount.

    Funding for applicable AI (healthcare, fintech, retail) is growing steadily, while other segments are facing a steep decrease in funding. According to the CB Insights State of AI report for Q2 2022, global funding for AI startups dropped for the third consecutive quarter with a 21% decrease quarter-over-quarter. Funding rounds of more than $100 million have dropped by a third quarter-over-quarter. A few anomalies exist, such as Anthropic Labs and Inflection AI, raising $580M and $225M for large-scale machine learning and research. Retail AI increased by 24% in funding, while healthcare AI decreased by 20%. Fintech AI maintained its funding levels, with Taxfix raising $220M.

    The pivot from growth to profitability

    After the windfall from Covid — we’re witnessing a pivot from growth to profitability. This is happening in Silicon Valley and on a global scale. Elon Musk has demonstrated this to the extreme with Twitter by cutting half of the workforce. In a few decisive moves, he’s paving a new standard for how profitable a new tech company should get. A 10% to 20% RIF (reduction in force) will no longer suffice; an enterprise software company will need to reduce at least 30% to 40% to remain profitable.

    Private equity companies have a rare opportunity to concentrate more on small and mid-cap companies. The realization that you can do away with 40% to 50% of the workforce and still keep a product running is promising. Company owners should look carefully into their projections and aim to have enough runway for the next 18-24 months. They need to modify their strategies quickly, as procrastination can be detrimental to their immediate and long-term viability.

    Related: How to Know If Your Tech Startup Is on the Path to Profitability — or Not

    How startups can leverage big layoffs

    It’s open season for companies, but that also means that the talent war is heeding on its heels. To preserve or attract leading talent, tech startups must meet the growing demands of the modern worker. This might mean putting more emphasis on work-life balance, social and health benefits, lenient time-off policies and last but not least, diversity, equity and inclusion practices (DEI).

    In 2022, the Google search phrase for “companies with a social purpose” increased by 132%. We’re undergoing a period of growing economic disparity in wealthy nations, social division and ensuing geopolitical tensions. It’s natural to assume that people are looking for workplaces that provide psychological safety and satisfy a need for purpose. As tech leaders scour the landscape for the best talent, this is something to consider. For venture builders, access to fresh talent with technical abilities can help supercharge innovative startups.

    Agile movements, long-term consequences

    Despite the ominous economic environment, there are a few things for startups and investors alike to consider. For venture builders, a downturn season is an excellent time to recalibrate and stress test the resources needed to execute the best results. It’s a period all about scale, not growth.

    The anticipated decline in economic growth, a less robust job market and a lack of inflationary pressure is expected to halt global interest hikes in 2023. Initially, investors may view this development favorably. However, past experience has shown that the economy tends to suffer the most harm once interest rates have already gone up.

    It’s safe to assume we don’t expect a downturn in the magnitude of the Great Recession. Corporates and households are currently running a better surplus than they have prior to any recession. From around 2020-2022, the banks saw the lowest loan-to-deposit ratio in modern banking years. In an interest-free world, deposits grew at unprecedented rates. This means there’s still plenty of capital to be deployed into the market. Through a correctional period, only the startups with the best products and talent will prevail, while the rest will settle into the dust.

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

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    Danny Cortenraede

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  • Investors Can Safeguard Their Money By Focusing on This Step | Entrepreneur

    Investors Can Safeguard Their Money By Focusing on This Step | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    When it comes to investing, one of the most important first steps is due diligence. This essential component gives you a chance to look deep into a company and uncover potential surprises that could cost your firm a lot of money and headaches down the line.

    Due diligence is a systematic process that evaluates the risks involved with a particular deal, the details of the deal and the positive or negative impact the deal has on the investment portfolio. You can equate due diligence to doing your homework on a potential investment.

    Related: Here’s What’s Brewing in the Minds of Startup Investors

    Take a pause

    It’s not uncommon for buyers to have a used car inspected before they seal the deal to ensure the car works as described. This extra step keeps them from losing money to a bad investment, just as a home inspection protects lenders underwriting a mortgage. Any investment decision requires some consideration, but the potential losses are much higher when considering investing in a startup.

    There are several elements of due diligence in investment management. Two key components are industry due diligence and legal and corporate due diligence. With industry due diligence, research is performed to understand the industry as a whole. It looks at competitors in the industry, the major players in the market, the advantages the startup holds, consumer trends and more. Legal and corporate due diligence looks at the startup’s details, from the founders to the corporate structure and everything in between.

    The key to due diligence is doing the homework before the deal gets underway. When an investment opportunity comes up, put the brakes on moving forward until due diligence is done. You can avoid making a bad investment when your decision-making is informed by facts.

    Related: Is It Worth It? 5 Ways to Identify a Promising Business Investment

    Follow the process

    Moving systematically through the two primary components of due diligence leaves no stone unturned in learning about a potential investment. The approach is all about gathering information, but each component requires different data.

    Industry due diligence

    The first step in evaluating a startup is understanding the market where the startup operates. There needs to be a demand for the product or service the startup offers. If there are already several players in the market, consider whether or not this startup can fill in a gap or niche. A market already saturated with oversupply from dominant players is a tough one to break into and be profitable in.

    Subject matter experts, consumers and the company management all have a perspective worth listening to. The more information you have available, the more informed you are when making tough decisions. You can further break down your analysis by the following risk categories:

    • Competitor risk
    • Market risk
    • Regulatory risk
    • Technology risk
    • Execution risk

    If the startup you are looking into doesn’t have a well-detailed plan to address and mitigate these risks, you may want to pass on the investment opportunity. These are primary concerns over the company’s long-term viability, which ultimately impacts profitability and your return on investment.

    Related: Want to Invest in a Startup? Here Are 3 Things You Should Know

    Legal and corporate due diligence

    After you confirm consumer demand and market availability for the startup, move on to look at the details of the startup team and its operations. Since your money and sometimes reputation become intertwined with a startup investment, you need to conduct an in-depth investigation into the inner leadership and workings of the company.

    Take a deep look into the financials, confirming their reporting about funds or account holdings. Always verify the reality of their growth or projections using their own financial reports and your independent verification. Some of the information to review and verify includes:

    • Ownership and corporate structure documents, including stock option agreements, shares and certificates of incorporation
    • Documents that include the term sheet, intellectual property ownership, employment agreements, lease or purchase contracts, litigation history and insurance coverage
    • Tax compliance, licenses or permits

    The more thoroughly you conduct your review, the more accurate your view of the investment opportunity is. You can see beyond the immediate attraction of high returns and evaluate long-term financial stability, functional partnerships and chances of profitability.

    Related: Entrepreneurship is Risky. Follow This Less Risky Path For Entrepreneurial Success

    Realize what’s at stake

    Due diligence is your chance to protect yourself from a bad investment. Startup teams are typically eager and overly optimistic. While they believe in their product or service and will stake their livelihoods on it, you have the luxury of being more realistic about their future. Though there is no intentional fraud behind their investment requests, without due diligence, you may find yourself invested in a company that can never meet its forecasted goals because of a poor business structure, saturated market or inexperienced leadership team.

    Due diligence allows you to prioritize investment opportunities with the highest success rates. It also prevents excessive losses as the information guides you to an appropriate investment amount for the situation.

    Accept the responsibility

    Knowledge is power, and due diligence is the way to gain the upper hand when considering a startup investment. Be willing to do the work and pay the price for due diligence because this expense could save you from making a poor investment decision that costs you more down the line.

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    Cosmin Panait

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  • Why the Current Volatile Market is an Opportune Time for Impact Investing | Entrepreneur

    Why the Current Volatile Market is an Opportune Time for Impact Investing | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    After the Great Recession of 2008, there was a lot of retrospection, particularly in the non-profit space where I spent much of my career. The conversation was mainly about the fact that foundations and not-for-profit endowments lost a massive amount of money in the market when they could have granted more to those serving the poor, addressing societal ills or investing in undercapitalized entrepreneurs and underserved communities. As we navigate through the current fluctuating market conditions, do investors really want to repeat those mistakes?

    While the market may bounce back here and there, indicators point to significant headwinds in front of us, especially for traditionally underserved business owners and entrepreneurs. According to many experts, the possibility of a recession will persist through much of 2023.

    With that in mind, investors should pull from past experiences and realize that betting on people and entrepreneurship can be more of a winning proposition than leaving money in a highly unpredictable market. Especially one being squeezed by inflation, climbing interest rates, global supply chain issues and geopolitical unrest. Instead of continuing to invest solely in a highly volatile market, this is an ideal point in time to invest for double-bottom-line impact.

    I wholeheartedly believe that increasing investment in small businesses led by rising entrepreneurs – and knocking down barriers to flexible risk capital – can change lives, uplift underserved communities, and provide investors with stable returns. As the economy teeters on a possible recession and investors endure diminished returns or losses across their portfolios, most firms right now are challenged to find a nexus of opportunity.

    Related: We Might Be Headed Toward a Recession, But a ‘Bigger Catastrophe’ Could Be on The Horizon

    Given the high-risk environment, there may not be a more suitable time to pivot investment strategies and redirect private equity toward small businesses across traditionally undercapitalized regions. Deploying capital that supports entrepreneurs who are driving innovation and permanent job creation in distressed communities has proven to be an effective hedge against market volatility in delivering both strong financial gains and meaningful social impact. This is because small business investing is uncorrelated with the broader market returns.

    Because small business investors generally use more flexible, non-traditional investment vehicles to bridge market gaps, they may be less susceptible to broader economic swings. Essentially, these types of investments, which often leverage government incentive programs such as New Market Tax Credits or Rural Jobs Acts, are tied directly to the performance of the companies receiving the investment dollars. And, of course, there is little or no tie at all to how public stocks are performing.

    However modest, investments in well-run small businesses and promising entrepreneurs look increasingly attractive in today’s market, while previously “safe” investments appear risky. Morgan Stanley has stated that “sustainable investment strategies may potentially offer downside risk protection to their investors in times of high volatility,” and in years of volatile markets (2008, 2009, 2015, 2018), sustainable funds’ downside deviation was significantly smaller than traditional funds.

    Despite concerns that a trade-off exists between returns and generating impact, studies have found the opposite true. A Bain Capital study of 450 private equity exits involving impact funds or impact-related causes from 2015-2019 revealed that the median multiple on invested capital for impact deals was 3.4 — compared to 2.5 for all other deals. This is what a double-bottom line ethos promises: that achieving returns lies in step with achieving impact. Companies that value and deliver impact may be higher quality investments from the get-go, making prioritizing impact an essential part of any investment decision.

    Related: Why Millennials and Generation Z Love Impact Investing

    Additionally, it is important to point out there is a strong opportunity to support Black and Brown-owned businesses that are particularly impacted during times of economic downturn. Firms and institutions have a tremendous opportunity to veer from traditional investment approaches that can incur steep losses in a down market and, instead, use their funds to address the structural disadvantages that have long worked against Black and Brown entrepreneurs in accessing the capital they need to grow their businesses.

    Investing in smart, resourceful business owners can have an outsized impact on underserved communities, catalyzing development and increased prosperity. Because small businesses remain off the stock market, their performance may be less correlated to market performance than their larger, publicly traded counterparts.

    However, this is a double-edged sword. By virtue of their size, small businesses are more vulnerable to volatile economic conditions. Right now, they face potentially severe losses in access to flexible capital and other challenges resulting from the inflationary environment.

    Therefore, we now have both an opportunity and obligation to sustain communities by investing in the small businesses and aspiring entrepreneurs that hold them together. By deploying capital to businesses in capital-starved markets, we can earn stable returns and support owners striving to make it in a competitive business landscape, providing them with the readiness tools to support sustainable growth and create lasting wealth in undercapitalized communities.

    The timing couldn’t be better for investors to consider impact investment options that provide undercapitalized entrepreneurs with alternative financing options. It may be their best opportunity during these volatile market conditions.

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    Sandra M. Moore

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  • Should You Consider a High-Yield Savings Account? Here’s What You Need to Know. | Entrepreneur

    Should You Consider a High-Yield Savings Account? Here’s What You Need to Know. | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    As an entrepreneur, it is essential to have a solid financial plan in place to manage business cash flow and prepare for unexpected expenses. One option to consider as part of this plan is a high-yield savings account. A high-yield savings account offers a higher interest rate than a traditional savings account, allowing money to grow faster.

    There are both positives and potential negatives associated with high-yield savings accounts that will impact whether an individual should consider one.

    The high-yield savings account basics

    As the name suggests, high-yield savings accounts offer a higher yield on account balance compared to standard savings accounts. While on the surface a high-yield savings account may appear the same as a traditional savings account, there are some differences. For example, there may be a restriction on the number of withdrawals per month or year. There may also be a higher minimum balance requirement.

    However, with rates that can be ten times more than a traditional savings account, a high-yield savings account is certainly worthy of consideration.

    Related: The 8 Best Places to To Stash Your Retirement Savings

    Reasons to consider a high-yield savings account

    There are several good reasons to open a high-yield savings account.

    Access to higher rates. The typical rates on traditional savings accounts are on the rise, but they still cannot compete with the rates offered by a high-yield saving account.

    Less risk. While wanting a higher return on funds is typical, an individual may not be prepared for the higher risk associated with other investment methods. Most providers of high-yield savings accounts are FDIC insured. This means that there is up to $250,000 of coverage, so should there be a problem with the bank, an individual is guaranteed to get their money back.

    Diversification. As an entrepreneur, it’s always wise to diversify investments. A high-yield savings account can be a great complement to other investments, such as stocks or real estate, providing a stable and safe place to store some cash.

    Online flexibility. A high-yield savings account is a flexible option for entrepreneurs as it allows access to funds quickly and easily. Since most high-yield savings accounts are online-based, it makes it very easy to manage money using the bank’s online platform or app.

    Minimal fees. High-yield savings accounts typically require a low minimum deposit and have no monthly maintenance fees, making them a cost-effective option for entrepreneurs. For example, the Amex high-yield savings account has no account minimums and no monthly maintenance fees. Always check the account terms to make sure there are no fees, but generally speaking, the fee structure is more generous compared to traditional brick-and-mortar savings accounts.

    Related: 6 Best Savings Accounts of 2023

    Reasons why a high-yield savings account may not be right for you

    As with most financial products, there are some circumstances where a high-yield savings account may not be the right choice.

    Limited earning potential. While high-yield savings accounts offer a higher interest rate than traditional savings accounts, the earning potential is still limited compared to other investment options such as stocks or real estate. Entrepreneurs looking to grow their wealth quickly may want to consider other investment options.

    Maximum withdrawal limit. While the savings account is still accessible, individuals will only be able to make a maximum number of withdrawals before incurring a fee. Most banks restrict the number of times individuals can access their money each month. The only way to transfer money out is via wire transfer, electronic transfer and check, or by withdrawing funds up to six times per calendar month without incurring a penalty fee or putting the account at risk of closure.

    Lack of physical branch access. Most online high-yield savings accounts are associated with banks that don’t have physical branch locations. This means that should a problem arise with the account, individuals will need to rely on online or phone support.

    Minimum deposit requirements. Some high-yield savings accounts require a minimum deposit, which may be too high for some entrepreneurs. Without having enough money to meet the minimum deposit requirement, there is no option for opening an account.

    There could be transfer delays. While it’s possible to transfer funds from one bank to the new high-yield savings account, there may be some transfer delays. The typical wait time is 24 to 48 hours for funds to be credited to the new savings account.

    How to choose the right high-yield savings account for you

    As an entrepreneur, choosing the right high-yield savings account can be a bit of a challenge. There are many options to choose from.

    Once someone has decided that they would like to open a high-yield savings account, it’s time to consider choosing the right account. With so many high-yield savings accounts on the market, it can seem a little daunting to choose the right one. However, there are some key factors to consider that will help with making an account decision.

    Does it offer high rates?

    High-yield savings accounts offer a higher interest rate than traditional savings accounts, but the rates can vary greatly between different accounts. It’s essential to compare interest rates and choose the account that offers the highest rate.

    Is there an existing relationship with the bank?

    The first thing to look at is if your current bank offers a high-yield savings account. Many banks offer access to high-yield accounts, and you may be able to access better terms if you link the account to your checking account or other bank products.

    Are there fees?

    You will also need to check if there are any fees or charges associated with the account. If the high-yield savings account has a monthly maintenance fee, check to see if there are waiver criteria so that you don’t need to pay the fee.

    Does the bank offer other attractive products?

    Finally, look at the other products the bank offers to see if they appeal to you. For example, some banks have an entire banking product line designed to help their customers improve their credit. In addition to a high-yield savings account, there might be a checking account with no overdraft fees, no monthly fees and a credit-builder-secured credit card.

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    Baruch Mann (Silvermann)

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  • 4 Lessons We All Should Learn from the Crypto Implosion

    4 Lessons We All Should Learn from the Crypto Implosion

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    Opinions expressed by Entrepreneur contributors are their own.

    I recently opened an office in Miami, and I love it. It’s simple — just a common area and a conference room — but modern and right by the water. It has a big storage area at the entrance, which I first considered converting into another conference room. But it had an odd electrical setup, so I asked my contractor about its history.

    According to him, between the electrical work, air conditioning units and security, the space had likely been a crypto trading office. He was sure of it. Then, I realized I had seen that setup before.

    In Miami, crypto is everywhere, with servers running so much data they require their own air conditioning units. When FTX collapsed, and the crypto market lost billions, Miami felt its impact. I knew a lot of people — friends and business associates — who went from making so much money on paper to now, hurting.

    Fortunately, I managed to stay out of it. Sure, I was interested. A few people I knew made a lot of money on crypto, which made it tempting. Still, I could hear my dad’s voice, chiming in with that old chestnut, “when in doubt, don’t.”

    These are the lessons I learned from this crypto collapse by following his sage advice.

    Related: ‘I’m Sorry. That’s The Biggest Thing.’ Sam Bankman-Fried and Cryptoworld Lose Big in FTX Meltdown, Company Files For Bankruptcy.

    Count the doubts

    I was never against the idea of crypto. Some of the fundamentals I find attractive — the blockchain creating supposed self-control rather than a Big Brother-ish federal banking agency. In the same way Web 3.0 promises to keep the Googles of the world from tracking our every digital move, crypto has its positives.

    But I was also wary of the negatives. While I knew many people in Miami personally involved in crypto, there were always enough people in my life not accepting it that I never fully understood how it could be trading at such high values. The process of cashing out seemed too complicated, and it reminded me of the old “pump-and-dump” stock trading scams.

    I also heeded Warren Buffett’s many doubts about the future of cryptocurrency, calling it “rat poison squared.” His arguments made sense: Apartments produce rent, land produces food, but crypto produces nothing tangible. If an expert like Buffett would turn down all of the bitcoin in the world for $25, a less experienced investor should certainly take inventory of their doubts before making any significant investments.

    Related: Now That Crypto Has Crashed, What’s Next for the Metaverse?

    Invest in what you know

    Let’s compare crypto with AI: I was uncomfortable exploring both technologies at first because I didn’t fully understand them. As the AI trend grew into a direction business was inevitably heading, I made efforts to learn about it. I found people who were able to give me straightforward explanations that allowed me to understand the technology. Since I could understand it, that made it easier for me to confidently invest in it.

    Crypto specialists, on the other hand, never came close to providing such clarity. Mining crypto is an abstract process, so I called upon the best person I knew in the field to explain it to me. Even still, the details were fuzzy and I would unlikely be able to re-explain it to anyone else. What I did understand was how much energy it required, which sounded crazy and unsustainable to me. Since that was my primary takeaway, I decided against investing.

    Crypto is notoriously difficult to understand. Yet still, without a full picture of what they are buying, people are willing to invest. A 2021 survey of 750 investors found that only 16.9% “fully understood” its value and potential, while 33.5% had “zero knowledge” or a level of understanding they described as “emerging.” Many simply invested because it seemed popular and they feared missing out.

    Trust me, I understand how easy it can be to jump on a bandwagon. I remember one new technology starting to take off — though I barely remember what it was anymore — but it was so hot that a friend insisted I get in on it. So, I did. Without even knowing what the company produced, I put money into it. I didn’t want to be left out of the next big thing. So what happened? I lost big. Fortunately, it wasn’t that much money, but it taught me never to invest in what I didn’t fully understand.

    Related: 5 Ways to Navigate Today’s Investing Challenges

    Pay attention to the people most involved

    Something about Sam Bankman-Fried, founder and former FTX CEO, put me off from the start. To me, SBF had all the markings of a scammer. He was dishing out financial support to the most prominent political names and getting his company’s name atop the Miami Heat stadium. He came into an industry full of what I saw as so many doubts with too much money, swagger, and confidence.

    I may not know who was using my office for crypto mining before I moved in, but I know someone did, and I wonder if they contributed to the industry’s increased rate of cyber attacks, scams and bankruptcies. Bad characters have been around forever — from the northern carpetbaggers taking advantage of the war-torn south to the Ponzi scheme record-holder, Bernie Madoff — but in crypto, they seem abundant. If you don’t feel comfortable with the people behind something, don’t invest in it.

    Related: 7 Things to Know Before Investing in Cryptocurrencies

    When risk is everywhere, be more careful

    When someone asks for guidance toward a safe investment, I always recommend land. No one is making any more of it, and it’s tangible property that, unlike stocks, we can make use of while holding its value. But still, land can lose value or suffer damage. A couple of weeks ago, I was driving down the west coast of Florida, where so many people who had lost their homes were rebuilding after hurricane Ian.

    In some form or another, everything comes with risk, so when an investment seems extra risky from the start, we should be even more careful about our decisions. Invest in understanding the fundamentals of a new technology first and take a more calculated risk. Learn as much as possible and write out any doubts throughout the process. If the doubts are all you understand by the end, then maybe you should rethink your investment.

    This crash may not be the death of crypto, but the industry certainly has a rough time ahead. It will be even harder now to get people on the bandwagon, and the federal government will likely increase its efforts to control it. But it should be a big wake-up call to investors to be warier of technological allure. This crypto implosion will not be the last to burn investors, but by learning lessons from it, we can better avoid this kind of massive damage the next time.

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    Jan Risi

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  • Here’s What You Need to Know About the Changing Face of Venture Capital

    Here’s What You Need to Know About the Changing Face of Venture Capital

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    Opinions expressed by Entrepreneur contributors are their own.

    Picture a venture capitalist. You might imagine an older white man in a suit, maybe with a gray beard. But the reality is that the VC landscape is changing — rapidly. Today, VCs are getting younger and more diverse. The rise of Gen Z angel investors perfectly illustrates this shift.

    There are more than 20,000 Gen Z angels investing in startups globally. And they’re putting their money into some of the most innovative companies around, from the Web3 space to clean energy. On a broader level, recent data shows that the average age of the typical VCT investor has dropped by 11 years since 2017.

    Related: Getting In On The Act: A New Generation Of Investors Is Here

    Young people are seeking higher returns

    What’s driving this trend? For starters, everyone under 58 is seeing the highest inflation of their adult lives. At the same time, young people have never seen healthy bond yields or bank deposit rates. The stock market offers little in the way of safety or stability, either, with millennials experiencing three “once in a lifetime” crashes in the last 20 years: the dot-com bubble, the financial crisis and Covid-19. Today’s bear market, too, is at risk of turning into a worse crash.

    With low public market returns and inflation still high, young people are searching for alternative investments that offer higher potential returns. And they’re willing to take on more risk to get them.

    VCs are also getting more diverse. For example, Base10 Partners is a black-led VC fund that raised over $130 million to fund seed-stage startups with between $500,000 and $5 million. Further, Arlan Hamilton has built a $36 million fund dedicated exclusively to black women founders, called Backstage Capital.

    This diversity is, in part, being driven by a desire to invest in companies that reflect the founders’ own experiences and backgrounds. This heterogeneity is set to increase the aperture of evaluation for startup opportunities and lead to novel value propositions being funded.

    Digital natives are flocking to VC

    Another driving force behind the changing face of VC is the fact that young people are digital natives. They grew up with the internet and are comfortable with digital tools and platforms. This makes them more open to new models of investing, like online VC funds.

    What’s more, digital natives are used to seeing startups succeed. They’re familiar with the stories of companies like Facebook, Tinder and Robinhood — all of which were founded by young people. This makes them more likely to view investing in startups as a viable option.

    Related: Here’s What’s Driving the Trend of Self-Made Gen Z and Millennial Millionaires

    Purpose-driven investors

    Finally, millennials and Gen Zers are purpose-driven investors. They’re interested in making a positive impact with their money and are drawn to companies that align with their values.

    This is reflected in the increasing interest in impact investing and environmental, social and governance (ESG) factors. In 2020, 33% of total U.S. assets under professional management were sustainably invested. This trend is only going to continue as more young people enter the VC landscape.

    Comfort level with risk is also leading young people to invest in new areas, like cryptocurrency and blockchain. These technologies are still in their early stages, but as digital natives, young investors are more comfortable with the risks involved. They’re also more likely to be interested in the potential rewards — which can be significant.

    The future of investing

    The face of venture capital is changing. And it’s being driven by a desire for higher returns, more risk tolerance and a focus on making a positive impact. Private market investing platforms have emerged to help individual investors more effectively deploy their capital, and more new offerings will come. Gridline, for instance, is a digital wealth platform that raised $9 million to provide access to top-quartile alternative investments with lower capital minimums, fees and liquidity.

    We’re at the beginning of a generational shift in terms of how people invest. As Gen Z gains more buying power, expect to see an even wider array of impact and venture investment products emerge — all tailored for this new investor class.

    Related: What You Can Learn From This 21-Year-Old VC Who Started A $60 Million Fund

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    Frederik Bussler

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  • How Startups and Investors Can Thrive in the Current Economic Environment

    How Startups and Investors Can Thrive in the Current Economic Environment

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    Opinions expressed by Entrepreneur contributors are their own.

    Today’s macro-economic environment has changed significantly and we see the signs everywhere. There’s an obvious economic slowdown, the stock market has declined, and recent reports of layoffs – especially in the tech sector – point to a looming recession. Despite the negative elements of such an economy, it also presents an opportunity for smart startup founders and savvy investors to thrive.

    The impact of venture capital

    It may be surprising how much venture capital (VC) investing impacts the global economy. Forbes reports that VC investing used to be very risky; even as it has grown, in the U.S., it accounts for only 0.8% of the gross domestic product, compared to about 5% for the private equity industry. The numbers are even smaller in the United Kingdom and Europe. Despite that, between 1980 and 2020, about 39% of all IPOs were venture-backed; VC-based companies have also been proven to grow more than two times as fast as their non-VC-backed peers over a ten-year horizon.

    Data also shows that VC investing drives innovation and employment. Public companies with VC funding account for 44% of U.S. public companies’ research and development spending. Over ten years, employment by VC-based startups increased by 475% compared to 230% for the control group.

    In my experience, startups are typically funded by the founder at first and later with the help of family, friends or angel investors. Beyond that, VCs often provide the additional capital needed for a startup to expand its market and scale to new geographies. VC firms are composed of experienced investors who provide not only funding but also valuable advice — helping startups avoid typical mistakes and connecting them with corporate partners to move their business forward.

    Many of the most valuable companies in the U.S. were funded by venture capital. These include Pegasus investments in Airbnb, SpaceX, Stripe, DoorDash, Instacart and Robinhood.

    Related: Why Some Startups Succeed (and Why Most Fail)

    Succeeding in this environment

    How should investors make decisions in this environment? I recommend they invest in stable, high-quality companies with limited debt, strong balance sheets and good cash flow. It’s ideal if the companies are in stable sectors that are expected to grow. Now is not the time for highly speculative investments, and it’s not the time to bet on highly leveraged startups. A reasonable debt-to-equity ratio — comparing liabilities to equity — indicates that companies are not taking on unnecessary risk in an attempt to grow.

    A recessionary economy changes the game for both startups and VC firms. Since funding may be less available, startups need to refine their business strategy and be disciplined in spending money, making the companies more sustainable in the long term. Entrepreneurs may see it as riskier to start a business. Still, startup hiring becomes easier at the same time, given the number of tech layoffs in the corporate section, such as those at Meta, Amazon and Twitter in recent months.

    This environment presents opportunities for investors to fund startups at better pricing than during the booming economy. Deals are typically less competitive, and lower valuations mean that investors get more for their investments. VCs also need to be extra careful to conduct due diligence to ensure their chosen investments are worthwhile.

    In my experience, I’ve seen up to 30% lower pricing in venture investments during a down economy, spanning from the seed-round stage to later rounds. This reinforces that a slow macro economy helps VCs get good deals, and the pricing of shares tends to stabilize in such an environment — giving investors more peace of mind than they would otherwise have.

    Related: Diverse Hiring and Inclusive Leadership Is How Startups Thrive

    Act now to benefit

    Despite the bad news in today’s economic environment, I recommend that startups refine their business strategy and that VCs take advantage of less competition to invest. Many successful companies were founded in recessionary times, so smart founders and investors can each benefit by actively participating despite the perceived risks.

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    Anis Uzzaman

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  • How NFTs Work — and How They Could Prove Profitable for Your Business

    How NFTs Work — and How They Could Prove Profitable for Your Business

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    Opinions expressed by Entrepreneur contributors are their own.

    2022 was an interesting year for NFTs (non-fungible tokens), to say the least. This was the year that saw public knowledge of NFTs go beyond Bitcoin and other cryptocurrencies to the field of digital collectibles, such as art and photographs.

    But while buying art and other collectibles may be getting most of the attention from the general public, they result in some of the more practical (and profitable) business applications getting overlooked. In reality, NFTs can have a variety of practical applications that help organizations achieve their existing business goals.

    First things first: How do NFTs work?

    NFTs are is cryptographic assets that are based on blockchain technology. The non-fungible aspect is important, as it gives NFTs distinctive properties that mean they cannot be replaced or replicated. They are unique, and can’t be manipulated or forged. Most often, we see NFTs in connection with digital assets, such as art, sports cards, games and other collectibles, where the blockchain provides a certificate of authenticity.

    NFTs can be bought and sold on the market, with pricing based on market demand, just like a physical product. However, the unique data that is part of the NFT makes it easy to validate ownership and verify the authenticity of the token.

    NFTs are also used to represent ownership details, memberships and more — and these varied use cases have proven key to business applications.

    Related: Here’s a Beginner’s Guide to Crypto, NFTs, and the Metaverse

    Linking digital tokens to physical benefits

    One key to generating business growth via NFTs is linking the tokens to a physical, real-world product or experience. As the report Brands in Web3 Q3 2022 by NFT Tech highlights, fashion brand Tiffany & Co. was able to turn NFTs into a set of exclusive physical goods. The company partnered with CryptoPunks to create an exclusive line of 250 “NFTiffs” pendants. Priced for 30 ETH (roughly $50,000 at the time), the unique pendants sold out in 22 minutes.

    Another example comes from the Australian Open. In 2022, the Australian Open launched a highly successful metaverse initiative of minting AO Art Ball NFTs that linked to data from live matches. This was paired with virtually hosting the Australian Open in a 3D virtual reality platform to provide an unprecedented level of access to one of tennis’s largest events.

    While the initial launch was successful in and of itself, the Australian Open’s commitment to this NFT initiative is poised to be even greater in 2023, with the announcement that holders of each Art Ball NFT will receive two complimentary seven-day Ground Passes to AO23’s finals week. Art Ball holders also gain access to additional exclusive experiences, such as streams and viewing suites through the “SuperSight” fan experience and access to other United Cup matches.

    With both Tiffany & Co. and the Australian Open, linking NFTs to real-world products or experiences proved to be a highly successful method for deepening relationships with their target audience.

    In addition, when NFTs are used in this way, they invite mass market participation, turning fans into financially-incentivized brand ambassadors who enjoy a high level of utility — and of course, can seamlessly trade their digital assets for real-world cash.

    Related: Putting the Intangible Into Your NFT Project

    Reaching new demographics

    NFTs don’t just help brands strengthen relationships with their existing customers — quite often, they can prove key to reaching a new audience entirely.

    Case in point: For quite some time, clothing brand Polo Ralph Lauren has seen its primary customer base largely concentrated among older adults, while younger demographics like millennials and Gen Z have been less interested in the clothing brand.

    In 2021 and 2022, however, Ralph Lauren made a full-fledged commitment to digital initiatives such as NFTs and the metaverse. These included launching a “phygital” fashion collection in Fortnite, as well as an exclusive digital clothing connection through the game Roblox.

    These digitally-focused efforts were a major success for the brand. As reported by Vogue Business, Polo Ralph Lauren saw its third-quarter revenue increase by 27% after the launch of its Roblox collection — with that growth largely driven by a 58% increase in the acquisition of new digital customers.

    In this case, strategic implementation of digital assets allowed Ralph Lauren to reach a younger target demographic in metaverse-style spaces where they would have the greatest appeal and potential impact.

    When done right, NFT initiatives can help revive sales and reinvigorate a brand’s image, making it more relevant and appealing in today’s competitive market.

    Using NFTs wisely for your business goals

    As these examples illustrate, the potential use cases for NFTs go well beyond selling digital art. With a strategic approach, businesses can use NFTs to find new ways to engage with younger, more tech-oriented demographics. NFT-based projects can help position your company as an innovator at the forefront of disrupting the marketplace.

    That being said, any business investment in NFTs should be done strategically. Major NFT failures in 2022 garnered a lot of media attention, and should serve as a powerful reminder for businesses as they enter this space. All investments in NFT should be done with the interests of the end customer in mind.

    When you focus on how your target audience could realistically benefit from your use of NFTs, you will be able to identify strategies that have true staying power, and that will build greater rapport between your brand and its most tech-savvy customers.

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    Lucas Miller

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  • Top 5 Fastest Growing Industries for 2023

    Top 5 Fastest Growing Industries for 2023

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    Opinions expressed by Entrepreneur contributors are their own.

    The world is changing rapidly, and with it, the industries that drive the global economy. In recent years, some industries have seen explosive growth while others have slowed or disappeared entirely. In this article, we’ll take a look at the top five fastest-growing industries and discuss what makes them so successful. From technology to health care, these sectors are driving the economy forward and paving the way for a brighter future.

    Related: These Are the 10 Fastest-Growing Jobs in the U.S.

    1. Shipping and delivery services

    The rising popularity of online purchases has led to an increased demand for shippers and is fast securing its place as the growth industry front-runner.

    The American Shipper reports that as much as 8% of all retail sales are made online, or $394 billion. With an increasing number of people purchasing items from websites like Amazon and eBay, there will be an increased demand for individuals who can transport these items from one location to another since the pandemic. It is predicted by many economists to be the fastest-growing industry world-over within the next year.

    As a result, shipping companies are hiring more people than ever, and your skills may allow you to join them. If you’re looking for a career that allows you flexibility in scheduling while still maintaining a stable income while working remotely (or at least part-time), this industry might be right up your alley.

    There are many benefits associated with being an independent contractor: flexible hours, no commute time, no dress code and a choice over how much work or money you want out of it (or how much time). These perks make it easy enough to fit into any lifestyle and succeed.

    2. The healthcare industry

    The healthcare industry is projected to expand by 19%, making it the second-fastest growing sector.

    The reason for this growth is the increasing demand for healthcare insurance and the need for more people to fill jobs in the healthcare industry. As our population grows, so do its medical needs — companies have to hire more doctors and nurses to meet those demands. More people are getting sick, which means that more people need treatment. This increase in demand has led to a rise in healthcare professionals’ salaries and an influx of new patients into the field.

    The influx of new patients who require medical attention due to new laws will also cause the demand for insurance policies to rise. For example, in 2019, many states mandated that employers cover their employees’ contraception costs under their health plans. This development has significantly increased the demand for healthcare insurance among young people seeking birth control coverage.

    Related: Telemedicine is the New Normal in the Health Care Industry

    3. Travel and food industries

    With the growing population and interest in traveling after years lost to the pandemic, dream jobs that combine travel with food and culture are set to land in third place.

    If you love to travel, consider a career as an agent or guide who helps others plan their trips. Ensure you’re certified by your local government to become a tour guide (usually required for historical sites).

    You could also be certified through organizations like the Professional Tour Guide Institute of San Francisco or the International Institute of Travel & Tourism Studies (IITTS). If you don’t want to work directly with tourists but still want to help with travel, become an agent for a company specializing in international flights and accommodations.

    Related: The Travel Sector Is Getting Upgraded

    4. Online retail

    As more consumers turn to online platforms for shopping, businesses are quickly adapting to meet this demand. Companies like Amazon, Walmart and Target invest heavily in online efforts to serve their customers better. With more people using the internet to shop and take advantage of discounts, the online retail sector is expected to grow significantly this year.

    The convenience of shopping online through the pandemic has significantly expanded — albeit less for wants and more for needs. However, e-consumerism is already showing a strong return, with 1 out of every five retail purchases occurring online and an estimated end-of-year worth of $1.1 trillion.

    5. The AI revolution

    The future of the global economy lies in Artificial Intelligence (AI). AI is expected to be one of the fastest-growing industries of 2023, already valued at $328.34 billion. AI has begun to revolutionize many industries, such as healthcare, finance and transportation. Through automation, improved data analysis capabilities and predictive analytics, AI is helping businesses become faster and more efficient while cutting costs. With its potential for tremendous growth and its ability to revolutionize existing industries, AI is set to be one of the most important drivers of economic growth not just today but for coming years.

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    Christopher Massimine

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  • 5 Bear Market Lessons From a Crypto Entrepreneur

    5 Bear Market Lessons From a Crypto Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    2022 was an important year for the crypto space. We will all remember the bankruptcies of major global companies: Luna, Celsius Network, FTX, BlockFi and others that left investors with massive losses. The bear market has dramatically affected the crypto economy and investors’ portfolios.

    Just like in 2013 and 2017, the market moves in cycles. First, we had the crypto summer, where everybody was hyped about their profits and gains. Then came the crypto autumn, and investors started to see red in their portfolios. But investors’ portfolios started bleeding when the crypto winter got underway, and even some big reliable companies went underwater.

    In this article, I want to focus on some of the most important lessons I have taken for myself and my company after living through one more winter of the crypto market.

    Related: Will Crypto Make a Comeback in 2023?

    1. Money management strategies are everything

    2022 is the year of fallen legends. Companies believed to be reliable borrowers, like Alameda Research, borrowed funds without collateral and ultimately went bankrupt due to improper money management. On top of that, other standout names in the crypto space, such as Luna, Celsius Network, FTX, and BlockFi, also went bankrupt against all market expectations.

    2022 showed that different approaches need to be used to track company assets, oversee their liquidity and provide collateral for obligations. The mistake many made was blindly placing faith in a company because of its size and reputation instead of analyzing the fundamentals.

    Related: How to Manage Your Money With Confidence

    2. Stay away from toxic assets

    The future market leaders are the companies who survived unscratched problems related to Luna, Celsius Network, FTX or BlockFi and do not hold toxic assets. These are the companies with the potential to launch new products and ideas.

    From personal experience, I can say that 2022 was when my company delved into exploring new directions. It proved that the standard earning tools on the market just recently have no future. So we chose to focus on developing new products that can fix the ongoing problems of the crypto market. I believe that doing this — answering a pain point of the sector and providing a reliable service to alleviate it — is a crucial step in maintaining your company’s viability in tumultuous market conditions.

    3. Watch out for tokenomics

    When looking at a company, all performance indicators are important. What good is it to have great management and a business model if the tokenomics are not good? People are first and foremost investing in the token itself, making tokenomics an essential piece of providing a stable development.

    Bad tokenomics often gives valuable insight into whether the company’s business model is sustainable over the long term. Look for projects with tokenomics designed to serve the investors, not the developers. Watch out for high inflation rates and other red flags, which are often signs of an unsustainable business model designed to enrich the very few.

    Related: 8 Smart Ways to Analyze Crypto Token Before Investing in It

    4. Don’t follow the hype

    This year proves that the market is often wrong. During the crypto summer, many coins and companies grew on hype. Investors hopped on the train and followed the crowd ignoring the lack of solid fundamentals and prospects of future growth. However, when the bubble popped, their portfolio suffered.

    Luna, for example. The company had $50 million in assets but still promised 20% interest payments in its own stablecoin currency. That meant $10 billion in payouts to people holding funds in its protocols. The business plan was too good to be true, but tons of people fell for it and lost everything when the stablecoin proved not to be that stable after all.

    Related: Is Crypto and NFTs a Passing Fad?

    5. Teamwork is essential

    In times of market turmoil, teamwork is more important than ever. The keyword is flexibility; the market is unpredictable, so it’s the team’s job to adapt to any changes rapidly.

    The market has very short business phases meaning that companies need to be highly flexible and able to adapt to new realities. Bear markets often make it impossible to plan too far ahead. Focus on what’s in front of you, prioritize clients’ objectives, predict what products the next phase of the market will be interested in, and prepare them in advance.

    Furthermore, the bear market can also be a great time to generate revenue and offer products that alleviate investors’ fears. Additionally, with the right money management skills, companies can alleviate clients’ anxiety by investing their funds in discounted assets.

    Stay positive. The bear market will be over soon

    The bear market is not easy, but staying optimistic is essential. Take a step back and realize that earning on the crypto market is a long-term game; that’s the wealth-building secret.

    My opinion is based on analyzing past phases, where typically, the crypto winter lasts 4-6 months, then comes the spring. It will be essential for companies to enter with a big user base, good products and opportunities to scale up their own business.

    Companies need to pay attention to the costs and build teams out of people who believe in the market more than ever. Teams should have crypto enthusiasts that understand the market and products well. Having pros on the team is essential, so do not let them slip through your fingers.

    Related: The Bear Market is A Blessing For Web3’s Future. Here’s Why.

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    Vladimir Gorbunov

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  • 3 Reasons Now is the Best Time to Start Investing

    3 Reasons Now is the Best Time to Start Investing

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    Opinions expressed by Entrepreneur contributors are their own.

    Thanks to record-high inflation, geopolitical instability and the first interest rate increases in years, the current market is, simply put, incredibly volatile. Existing investors are making strategic changes to their portfolios, and new investors are unsure if they want in at all. But for those fortunate enough to have disposable funds, is now the right time to get started?

    Here are three reasons to wade in — slowly.

    1. Time in the market is better than timing the market

    Generally, when one starts investing isn’t as impactful as how long one invests. With a long enough time horizon, a well-diversified portfolio, and the power of compounding, portfolio volatility usually smooths out. This has been historically proven repeatedly as it pertains to the stock market.

    By contrast, “timing the market” or waiting for stocks to hit a new low or drop from recent highs so that an investor can snag a bargain is risky. Short-term market behavior tends to be unpredictable, with current trends reversing on a dime. Waiting for the “perfect” moment to invest may mean passing up potential gains.

    In other words, for many traders in waiting, now is as good a time as any to invest because markets are down. But exceptions may arise for those who need their money soon, as a short-term downturn can wipe out a portfolio overnight. If you are a new investor looking for a long-term “buy and hold” strategy, this is one of the best times to enter the markets and begin investing.

    Related: Create More Wealth by Playing the Stock Market

    2. Downturns leave more room for growth

    Many investors view short-term volatility as a risk that negatively impacts their portfolio. In the short term, this is true: volatility often drags down the total value of one’s investments.

    That said, one of the primary ways that the stock market generates returns is when investors buy low and sell high. And what better way to profit off large price differences than buying in when the market swings downward? Forget timing the market — a good strategy for long-term growth is to buy when the market is down.

    It may help to view market volatility as a form of bargain hunting. By buying high-quality investments when they go “on sale,” investors can increase their future profit margins when the market recovers. The trick is sorting the junk from the gems.

    Related: How To Start Investing

    3. The market will perform sooner or later

    There’s no guarantee that any individual security will turn a profit. But historically, given enough time and increased economic activity, the stock market always performs — eventually.

    That said, the time between a crash and recovery varies widely, and it certainly cannot be forecasted when that will happen. As such, pinpointing how long investors have to wait to realize gains is nearly impossible.

    For instance, most stocks took 12 years to recover following the Great Depression. But during the COVID-19 pandemic, many stocks recovered within just four months. This a sobering reminder that there is no way to time bull or bear market cycles and that a market recovery can even mount in some of the worst economic conditions.

    Related: Why You Should Invest in Mutual Funds vs. Individual Stocks

    Start slowly to establish good habits and “feel out” the market

    So, is now the right time to invest? For investors who aren’t on the cusp of retirement, the answer may be yes. Every investor should consider their risk tolerance and time horizon before deciding when and where to invest. Starting slowly can ease new investors into the market without introducing excessive risk.

    Novices may also start simply with a dollar-cost averaging method, which involves investing small sums at regular intervals to even out the market’s ups and downs. While it’s not as exciting as day trading, dollar-cost averaging reduces the temptation to time the market and can even lead to more significant gains for investors.

    As scary as the current market may seem, competent investing is less about day-to-day developments and more about the future. Be strategic, stay focused, and only risk what you can afford not to touch over the future.

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    Kyle Leighton

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  • Chaos on the Trading Floor as Narrative Shifts, Earnings Misses Pile Up

    Chaos on the Trading Floor as Narrative Shifts, Earnings Misses Pile Up

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    Trading right now is chaotic. We’re watching earnings land and misses pile up, while the narrative on the economy shifts from inflation to a recession. 

    The producer price index report on Wednesday morning was lower than expected, which helped to cause a strong open as price fears continued to drop. In addition, retail sales were weaker than expected, which illustrates slowing demand and will also temper inflationary pressures, but it raises concerns about a sputtering economy. The Fed may have already tightened too much, and we are starting to see the economy respond accordingly.

    Early breadth was very strong but is starting to slip as the S&P 500 falls into the opening gap. The Nasdaq and Nasdaq 100 have had seven-straight positive days, so a “sell the news” reaction would not be a big surprise. There also is some poor positioning that is providing support for now.

    Conditions are now ripe for an intraday reversal, and we are seeing some signs of that now. The economic news on Wednesday is a mixed bag as it indicates inflation is cooling, but the likelihood of recession is increasing. A quarter percentage-point hike is now expected at the next Fed meeting — with the odds now at 97% — so weaker inflation is already discounted.

    In response to the market action, I’m managing positions tightly, holding high levels of cash and see little opportunity to build longer-term positions right now. One name I’ve added to is small-cap pharma stock, Actinium Pharmaceuticals Inc., (ATNM) , but otherwise, I’m working on some index shorts.

    So far this week we has seen 18 earnings reports, and 11 earnings per share misses. That is highly unusual. Typically EPS beats are 70% or more. But stocks have not been hit too hard on these misses so far. We have to watch this closely.

    (Please note that due to factors including low market capitalization and/or insufficient public float, we consider this stock to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)

    Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.

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  • 4 Secrets to Finding the Right Investors and Raising More Money

    4 Secrets to Finding the Right Investors and Raising More Money

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    Opinions expressed by Entrepreneur contributors are their own.

    While the market may present uncertainties at the moment, fundraising efforts are surely continuing. Luckily, Verbit has seen great success in fundraising, raising more than $600 million over the company’s lifecycle and securing our Series E round late last year.

    It’s not a given that investors from around the world will be able to understand your vision. We’ve been fortunate that they’ve seen our potential and understand our mission — so here’s what it takes to fundraise successfully as a private company and how you, too, can navigate investor relations to ultimately find the right people to back you.

    Related: 5 Tips for Navigating the Entrepreneur/Investor Relationship

    Serve as the “Chief Storytelling Officer”

    In fundraising, it’s all about storytelling. It’s about really demonstrating the founder-market fit.

    In my previous role as a lawyer, I identified a need and I became dedicated to seeing through my vision to build the solution. If the CEO is also the founder of your company, then it is most likely that they’ll be your “chief storyteller” as well. As the founder of Verbit, I’ve needed to master how to best tell the Verbit story. I needed to be able to articulate and explain our unique story and values, but more than that, precisely how an investor would reap success by aligning with us.

    We have investors in Asia, Europe, the U.S. and Israel. Part of our success can be attributed to being able to convince these investors from every continent on the planet — who come from different cultures — why we’re worth it. When you can cater the pitch to them specifically, you’re much more likely to be successful and align the interests of everyone for shareholder value.

    It starts with storytelling. However, when you get to the point of a real opportunity, it’s not just the storytelling aspect. You need to make the investors fall in love with not just the story, but also you.

    Know how to navigate investor organizations

    For successful fundraising, it’s all about speaking to the right people — those who can make the decisions. If you’re a B2B company, speak to the B2B partner. Find out who they invested in previously that’s similar to you and what their interests are.

    You’ll also have better chances of getting through to consideration when the decision-makers hear the pitch from you directly. To make an impact and also make sure no time is wasted, you must enter into talks with the actual decision-maker at the firm. Say no to finders or associates.

    Once you’re in the room — or on Zoom — with them, aim to build a partnership around an understanding of what makes them excited. Speak to a partner who you can build a mutual understanding and relationship with and discover if the funds and offer are relevant. Then, you just need to make sure the terms are good and fair. Establishing this shared vision and alignment is critical.

    Understand how to approach inbound investor leads

    If investors reach out to you, that’s great — but take the time to find out why they’re asking. There are five key questions we typically ask and reference, which allows us to vet inbound requests and make sure those who are reaching out are serious.

    Here’s our cheat sheet:

    1. How did you hear about [company name], and why does [our industry] interest you?
    2. What is the check size you usually invest and what are the growth rates you’re looking for?
    3. What does the investment process from your end typically look like?
    4. Who would be the partner sponsor that will support the deal? (i.e. If a junior employee or associate is doing the reach out, then find out who the decision maker is. Make sure the decision maker is in the room or in the Zoom meeting.)

    Answers to these questions provide a lot of valuable information for you to see if there’s a real fit. Remember, they need to choose to invest in you, but you also need to feel good about them. Additionally, even if the timing doesn’t work out for an investment, there’s also great value in continuing to build relationships with individuals at the firm anyway.

    Having relationships in place ahead of time will allow you to create real momentum and will result in making your working relationships incredibly strong ones when the time comes.

    Consider your term sheets

    Then, when it comes to the terms, having informal talks that drive the discussion and negotiations can be helpful. You want to know what the likelihood is that the deal will be approved. I’ve heard many stories of signed term sheets and parties that backed off. I also hear it more and more often.

    If you sign a term sheet, will it get done? What’s the probability of final close? Validate that by asking about the process and understanding what’s needed by an investment committee. At the end of the day, investments provide options. It’s not always best to take the highest valuation.

    Investors need to make assessments on both your tech and your story. You need to access whether they bring you not just the funding, but the right team to help you and guide you to your goals. Make sure they believe in you.

    Ultimately, a company looking for fundraising must demonstrate the market size, how capable their founder is, the company’s technological moat, its proven business model and profitable revenue growth. Access to this information will arm partners with the information they need to invest in you.

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    Tom Livne

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  • Step-by-Step Guide on How To Buy a House in 2023

    Step-by-Step Guide on How To Buy a House in 2023

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    Buying a home is an integral part of the American dream. There’s something special — almost sacred — about the idea of owning your own property where you can raise kids and grow old with your spouse before passing on that property to your descendants.

    The trouble is, buying a house is fairly complicated, particularly in the modern market. Let’s break down how to buy a house in 2023 step-by-step.

    Related: Forget Everything You’ve Read: Buying a House is NOT For Suckers

    Step 1: Do tons of research and figure out your financials

    As a first-time homebuyer in 2023, your first priority should be to do a lot of research. Buying a home may be the most expensive purchase you’ll ever make in your life, so it will be in your best interest (both personally and financially) to pick the perfect home and area and to consider your financials carefully before pulling the proverbial trigger.

    Specifically, you should determine:

    • What kind of home do you want in terms of its square footage, features, inclusions, etc.
    • Where do you want to buy a home. Generally, homes in suburban areas or metropolitan areas are more expensive. Prices can also increase given factors like proximity to good schools, whether or not the home is in a good neighborhood, etc.

    Figure out the kind of home you want to buy and where you want to purchase a property before going any further. Don’t start home shopping without establishing your non-negotiables.

    Related: 5 Tips for First-Time Home Buyers

    When is a good time to buy a home?

    The best time to buy a home is during a “buyer’s market.” Put simply, this means that there is more favorable market pressure toward homebuyers compared to sellers. Generally, this means there is a surplus of available homes, meaning homebuyers have more choices. Since there is high supply and high demand, sellers have to meet buyers more in the middle and negotiate more to close deals.

    All of these factors combined mean that home prices should be lower than average (or at least lower than they have been in recent months).

    In contrast, a seller’s market means that home prices are higher given a high demand and low supply. You may have fewer options for available houses, and you’ll have to pay more because sellers have more bargaining power.

    Try to time your home purchase so it’s during a buyer’s market. If you aren’t sure when that is, ask a realtor or real estate agent. They may be able to advise you on whether to purchase a home now or wait down the line.

    So, will 2023 be a good time to buy a home? To get a clear answer, you have to look at the current data, trends and predictions for the coming year.

    Recently, home prices across the U.S. have increased to astronomical levels. Data from Zillow, the leading online marketplace for real estate by user volume, shows that average U.S. home prices have risen by 29% since the beginning of the Covid-19 pandemic in 2020.

    In 2022 alone, mortgage rates skyrocketed from 3.22% in January to 7.08% by the end of October. While it’s impossible to know for sure how mortgage rates will move next year, many are making predictions. On the low-end Fannie Mae predicts an average range of 6.2% and 6.6%, while others, such as the Economy Forecast Agency (EFA), predict rates to hit 7% in the first quarter of 2023 and top out above 11% by the fourth quarter. However, increasing home inventory and fewer recent home purchases in major markets could indicate an incoming market correction.

    In other words, you might consider waiting for a few months or until the middle part of 2023 before buying a home to see if prices decrease.

    Related: This Is Why You Should Be Investing in Real Estate Right Now

    How much money do you need to buy a house in 2023?

    Take a hard look at your budget and figure out how much you can spend on a property. To get a mortgage, you need at least 3% of a home’s asking price for a down payment. Think of this as a lump sum good faith payment to show a home seller that you are serious about paying off your mortgage over time.

    If you’re a veteran, you may be able to access special mortgage loans that don’t require a down payment. These loans are the exception rather than the rule. In addition, it’s wise to make as much of a down payment as possible toward the home’s value because it will lower your interest rate and how much you have to pay each month on your mortgage.

    Your monthly mortgage payment is largely tied to your initial mortgage agreement (at least for conventional loans). If you want your monthly payments and mortgage rates for homeownership to be low, put down as much cash as you can toward the purchase price, even if you use credit cards. However, it’s important to do a cost-benefit analysis to see if you’re gaining (or losing) by paying with a credit card. There are certainly risks, but there can be benefits as well.

    This is also true for property taxes, PMI or private mortgage insurance, and other costs.

    Related: Mortgage Rates Hit a 16-Year High of 6.75%. Here’s What That Means for the Industry.

    Don’t forget to consider closing costs, either. Closing costs usually equal 3% to 6% of a property’s total, and they cover various fees to close a real estate deal, like attorney fees, title insurance costs, etc.

    For example, say that you want to purchase a home worth $350,000. In most cases, you’ll need a down payment of at least 3% of $350,000, which is $10,500. After the down payment, you’ll have to account for closing costs. To split the probably costs down the middle, plan for 4.5%. 4.5% of $350,000 is $15,750. In total, this means you’ll need around $26,250 to purchase that $350,000 house.

    You can try negotiating closing costs and securing a loan for a smaller down payment. However, it may be wiser to save more than you need so that you can comfortably outbid other interested parties and purchase the home quickly.

    Related: 10 Ways to Prepare Yourself for a Big Purchase

    Step 2: Talk to a real estate agent

    The best way to buy a house in 2023 and beyond is to contact a knowledgeable real estate agent. Real estate agents are homebuying experts who know the local market and can take you to houses that meet your needs in your target area.

    Say that you want to find a home with three bedrooms and two bathrooms, and a big yard for your dog. Rather than looking through online listings and driving around yourself in search of a stellar property, you can speak to a real estate agent and explain this, plus tell them all your other necessities or desires.

    The real estate agent will then look on the market and multiple listing services (MLS) for your area to find appropriate homes. They’ll draw up a list, contact the sellers and invite you to tour those homes so you can pick the best one.

    In short, real estate agents make finding the perfect home much easier and faster.

    Do you always need a real estate agent?

    No, and skipping a real estate agent could save you some money in terms of closing costs (real estate agents usually take a commission, which is a percentage of the home’s asking price). However, cutting the middle man means you’ll have to do much more research and find appropriate homes for your needs.

    Generally, it’s only advisable to skip hiring a real estate agent if you already have a property in mind and know the homeowners personally.

    Related: 11 Things You Need to Know About Real Estate Negotiations

    Step 3: Contact lenders for preapproval for your mortgage

    Mortgage pre-approval is an important part of the home-buying process that you shouldn’t skip in 2023. If you are preapproved for a mortgage, your lender — such as a bank or credit union — says they’ll most likely underwrite a loan for you based on your credit history, financial profile or history with their branch.

    Getting preapproval also accelerates the mortgage lending process. If you find a home you love and need a loan quickly to purchase it before another prospective homebuyer, being preapproved will let you get your funding faster to secure the purchase.

    Note, however, that preapproval only counts toward mortgages up to a certain amount. A bank might preapprove you for a loan for $400,000, but not $500,000.

    Regardless, a preapproval letter shows you have earnest money to put toward a property and will help you in your house hunting in any real estate market.

    What if you can’t get preapproval?

    You may not be able to qualify for home loan preapproval based on factors like low credit score, no financial history with a given institution, etc.

    If that’s the case, don’t lose hope. You can always boost your credit by waiting a few months and making your utility payments on time. You can also contact other lending institutions for preapproval.

    If you don’t have much of a credit history but have other beneficial attributes, like veteran status, you can try to qualify for federal loans from the U.S. Federal Housing Administration or FHA. FHA loans and VA loans are good means for borrowers who have low debt-to-income ratios but less than stellar results in their credit reports.

    Step 4: Begin looking for and touring homes

    At this stage, you should start looking for and touring homes that are on the market, usually with the help of your real estate agent.

    Remember that you don’t have to accept the homes your real estate agent has prepared or outlined for you. If none of the homes fit your needs, ask them to find another property. Real estate agents won’t do this forever, but many are genuinely interested in getting you the best deal and finding the perfect property for you and your family.

    Related: 7 Secrets Luxury Home Buyers Need to Know

    As you look at homes in 2023, listen to your real estate agent’s advice. They might tell you whether a certain feature or amenity is difficult to find and may offer advice regarding when you should purchase.

    If, for instance, your real estate agent says you should make an offer on a given house quickly because it is highly competitive, listen to them. Otherwise, you might miss out on an attractive property because you were too hesitant.

    Step 5: Choose a house and make an offer

    Your next step is to decide on the house you want to purchase and make a competitive offer to the seller. Of course, what constitutes a competitive offer in 2023 can vary heavily from place to place and market to market.

    What’s a good offer?

    Generally, you should try to make a competitive offer based on the prices of surrounding homes or the listing price stated by the seller. But there are exceptions to this unspoken rule.

    In many cases, you can make a slightly lower or cheaper offer for a house if you offer to pay most or much of the cost in cash. This is advantageous for the seller because they get access to the money immediately. Paying in cash isn’t an option for many Americans, however.

    Speak to your real estate agent about what they think a good offer would be. They may be able to offer insight into the market competition, whether other buyers might be able to offer more money than you, etc.

    U.S. News & World Report predicts existing home prices will decrease by about 5% nationally and up to 10% or more in high-priced areas; however, not everyone expects prices to fall everywhere. Lawrence Yun, the senior vice president of research at the National Association of Realtors, believes “there’s a chance that half of the country may witness price increases, while the other half will see price drops.”

    If other buyers are interested in the same house, you may have no choice but to “highball” your offer to sway the seller to your side.

    Related: Report: It’s Getting Harder and Harder to Become a Homeowner

    Step 6: Negotiate with the seller

    Purchasing any house in 2023 requires some haggling and negotiating. Don’t be afraid of this, as it’s a necessary part of the process! Most negotiations revolve around who will pay for most of the closing costs.

    Closing costs

    As noted earlier, closing costs include various fees, insurance payments, and commission fees for involved realtors. Generally, closing costs are paid for by the party that benefits most from them – for instance, you’ll pay for your real estate agent’s commission, while the home seller will pay for the inspection (see more below).

    You can negotiate with the home seller to cover some or all of your closing costs, however, if you have other benefits to bring to the table, such as buying the house with cash, being able to close the deal quickly, and so on.

    Related: 5 Steps to Master the Art of Negotiation

    Step 7: Schedule an inspection and appraisal

    No matter how much money you offer, it’s a good idea to schedule a home inspection and home appraisal at the earliest opportunity. In 2023, ensure you schedule the inspection first.

    A home inspection involves a licensed inspector coming out to the property and making sure that it is in good condition, that its foundations are secure, and that there aren’t any major problems that the home seller failed to disclose to you beforehand (and that might cause you to rethink your offer or offer less money).

    Once an inspector has finished their work, they will create an inspection report for you to review. Make sure the inspection doesn’t reveal any major issues before moving on.

    Next, schedule an appraisal. This process is also carried out by a licensed professional. The appraiser essentially checks the prices and values of similar homes in the area, called “comps,” to make sure that the seller has listed their home for a competitive, fair price.

    If the appraisal report says the home should be worth much less than it is listed for, go back to the bargaining table and try to get the seller to lower the price. The seller may try to push back against this.

    If the seller isn’t willing to sell their property for a reasonable, fair price, walk away from the bargaining table and look for a different property. Even in a seller’s market, there’s almost certainly another house that will be perfect for you and your family that you don’t have to overpay for.

    Are these steps really necessary?

    Yes. You should never buy a home if the seller wants you to skip the inspection and appraisal steps. It could be a sign that they are trying to trick you into purchasing a bad property or a home with a lot of things wrong with it that will require you to sink even more money into it in the future.

    On top of that, most mortgage lenders require you to complete an inspection and appraisal and include that paperwork with your loan application. No mortgage lender wants to finance the purchasing of a home that has a lot of problems, which may make it difficult for the mortgagor to pay back their loan.

    Step 8: Apply for a loan

    If everything looks good so far, it’s time to apply for a loan from a bank, credit union, or other financial institution. Applying for your loan should be quick and simple if you have already gotten preapproval. Still, be sure to complete the paperwork carefully and comprehensively so you don’t miss anything.

    If all goes well, you’ll get your loan approved in a matter of days, allowing you to finalize the offer with a home seller and move to the final steps of the process.

    Once more, if you don’t qualify for any mortgage loans, try to improve your credit in the meantime or seek out alternative means of financing.

    Related: 10 Questions to Ask Before Applying for a Bank Loan

    Step 9: Contact other necessary professionals

    At this stage, you need to contact other key professionals in the real estate industry. In prior years and in 2023, the process involves a few major parties.

    Real estate attorney

    You’ll want a real estate attorney to look over the closing documents and ensure there aren’t any loopholes for any party to exploit. Real estate attorneys can work with flat fees or commissions, so investigate how much you’ll have to pay for this particular closing cost.

    Title insurance company

    You’ll also need to contact a title insurance company. The title insurance company ensures your purchase (specifically, the title for the property) so that you’re protected if you discover or are made aware of a problem with the title later.

    For example, if you purchase a property from an apparent owner, only to discover that they didn’t have the true title to the property when you made a purchase, your title insurance will protect you from financial fallout.

    Homeowners insurance company

    Don’t forget to contact a homeowners insurance company as well. Homeowners insurance is usually necessary if you want to be financially covered from losses or damages to your home, especially from disasters like fires or floods.

    Architect/contractor

    If you plan to renovate or change the property in any way before moving in, now’s the time to contact your preferred architect or contractor.

    Step 10: Check the property one last time

    You’re almost done. Now it’s time to do a last walk-through and check out the property before finalizing the purchase.

    Don’t skip this step in 2023! Always check your property one last time before buying it just to make sure that the seller has not tried to hoodwink you in some way. Make sure that all the appliances and electrical outlets work, and ensure that there aren’t any issues with the yard, doors or windows.

    If you notice something wrong with your dream home during the final walkthrough, ask the seller to fix it before the closing date.

    Step 11: Close the deal

    In contrast to the rest of this process, closing the deal when purchasing a house is pretty straightforward. Your real estate attorney will bring the paperwork to the final meeting with the home seller, and you and the seller can sign the documents that note the transfer of ownership.

    Your attorney will also usually be happy to take these documents down to your local county clerk’s office so they can be filed properly. They may or may not charge an extra fee in addition to their commission for this labor, however.

    Now you should receive the keys to your new home and be the official owner!

    What about financing in 2023? Because there are large sums of money involved in buying a house, that money is held in a third-party escrow account, usually selected by your mortgage lender. As soon as the deal goes through, the money is transferred from the escrow account into the home seller’s bank account or other intended destination.

    Related: 5 Tips for Millennial Home Buyers

    Step 12: Move in

    You shook hands with the home seller, signed all the paperwork and finalized the transaction. Once you get your keys from your real estate agent or the home seller, congratulations – you’re ready to move into your new house!

    Summary

    If you’re interested in buying a house in 2023, you have a lot to consider. Buying a house might seem like a lot of work, and it requires plenty of preparation beforehand. But in the end, you can buy a house so long as you have the right financing and a plan in mind. Follow the steps above, and your home purchase in 2023 will go smoothly.

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    Entrepreneur Staff

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  • Workplace Trends You Need to Know for 2023

    Workplace Trends You Need to Know for 2023

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    Opinions expressed by Entrepreneur contributors are their own.

    The New Year always brings a fresh perspective to our lives and work. And as with any fresh start, savvy leaders are identifying strategies to increase productivity, keep their workforce engaged and help take their business to the next level.

    A nuanced look at gender equality, closer-knit workforces and unique ways to engage staff through wellbeing are just three trends we’re likely to see in workplaces come 2023. It’s hoped they’ll make corporate culture in the U.S. much more hospitable for employees.

    In 2022, the buzzwords included flexible working, prioritizing purpose and increased transparency to help leaders better connect with their staff. So what will 2023 bring?

    1. Closer-knit workforces

    This time last year, Covid-19 was slowly rearing its head again for a dark and gloomy winter. Some employees had already started returning to the office, but many companies U-turned and sent staff home again. Fast forward to the present; a lot has changed in a year. People are back in offices, hybrid working has solidified and a seismic shift has happened.

    Related: Workplace Trends That Will Shape 2022

    What has been the result? While many employees are happier, 65% of businesses say it’s been “challenging” to boost morale and create a cohesive company culture while people are remote working.

    In 2023, these issues are likely to be addressed head-on: How can we make hybrid working work better for everyone? This could be more full-team meeting days while people are in the office, so their commuting time is productive. It could also mean cultivating a more appealing place to work to ensure when people do come in, they experience the benefits.

    2. Meaningful social impact

    While many businesses have focused on corporate social responsibility in the past few years, some have fallen into the trap of “greenwashing”: Making others believe their company is doing more to protect the environment than it really is.

    Alongside that, the generation now entering the workforce — Generation Z — is prioritizing working in companies that contribute to making the world a better place.

    So as the need for corporate social responsibility grows, companies should focus on what meaningful action they are taking now to protect our planet and the people on it.

    What are you doing this week, month or year, to make a difference?

    Focusing on this will have a desirable effect on your business. In a 2022 Gartner study of more than 30,000 people, 87% said companies should take a public position on societal issues. They found when corporations do take a stand, they can expect an increase in the number of employees who go above and beyond at work: 18% more employees showed high levels of “discretionary effort” at vocal employers compared to those companies that stayed silent.

    Related: 6 Signs It’s Time to Make Your First Operations Hire

    3. A focus on wellbeing

    Mental health and burnout have long been part of the conversation when we discuss improving work and the culture surrounding it — especially since the Covid lockdowns.

    But as we near the end of 2022, a shift is happening — for the better. The U.S. Surgeon General reported that 71% of employees believe their employer is more concerned about their mental health and wellbeing than ever before. This is a huge step forward and one we must grasp and run with. In response, the U.S. Surgeon General released a framework that aims to support workplaces in better improving the mental health and wellbeing of their employees. This includes: Ensuring there is an opportunity for growth, valuing employee contributions, enhancing social connections in the workplace and focusing on achieving better work-life integration.

    We’re likely to see more mental wellbeing initiatives and strategies employed across businesses that deliver meaningful and practical help to their employees — from self-care days off once a month to increased wellbeing benefits, mental health first aid training and even adaptations to the workplace.

    4. A nuanced take on gender equality

    In late 2022, Harvard Business Review surveyed high-performing professional women in the U.S. and found that while some women are, on the surface, flying high — they are taking on a set of specific maladaptive behaviors and beliefs to get by, and suffering because of it.

    Women reportedly are sacrificing their needs, beliefs and sense of individuality to stay at the top or even simply to “fit in” to get that promotion. One woman said, “Denial is the only way I can survive and do the job I was hired to do.”

    While gender equality has been part of workplace discussions for decades, the conversation will become more nuanced this coming year. Companies will aim to not only reduce the gender pay gap and bring more women into senior-level positions but also listen to women. Listen to their voice, their ideas and their creativity. Hiring women for powerful positions while leaving them feeling disempowered will not shift the equality landscape. Ultimately, it’s the understanding that women bring their strengths and ideas to the table and don’t need to adapt to traditional corporate values and structure to be successful.

    Related: 3 Ways You Can Brand Your Candidate Experience to Attract Top Talent

    5. Leadership investment

    It’s never been easy to be in a leadership position, but now more than ever, it can be complex to navigate. Leaders already deal with business pressure, budgets, negotiations, strategy and more. They also have to support and lead on communication, transparency, wellbeing, engagement, inclusion and equality for every single one of their staff. And now? They need to lead change: Prioritizing social impact, their employees’ and customers’ needs and wants and adapting their businesses to a changing social landscape.

    In a 2022 HR Insights Survey, CCI Consulting found more than 50% of businesses lack one critical skill that can make a difference: “leading change.” This is why, in 2023, we’re likely to see an investment in leadership through coaching, courses, training and exposure to diverse strategies that could work.

    There’s a lot of hope that 2023 will make positive strides for the corporate world, enticing those who left the labor force to reenter it. But to do that, there needs to be a real commitment to the issues discussed above and a belief that things will improve with dedication and effort.

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    Dr. Samantha Madhosingh

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