Forecast 2019: The trade war’s effect on startup investment
Jim Price is a lecturer in entrepreneurial studies at the University of Michigan Ross School of Business. He is a serial entrepreneur, the author of the recent book “The Launch Lens: 20 Questions Every Entrepreneur Should Ask,” and a contributing columnist for Entrepreneur.
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Are there any warning signs on the horizon that might slow the development of new startups in the coming year?
PRICE: Economic uncertainty triggered by the current federal administration’s trade war posture is going to negatively impact more than the stock market, which we’re seeing now. This economic uncertainty will likely have a cascading effect on private capital markets, including venture capital. If venture capitalists see less likelihood of achieving liquidity for their startup investments through IPOs or mergers and acquisitions, they’re likely to become more cautious with their new startup investments.
What’s the single most important question a would-be entrepreneur should be asking right now?
PRICE: That single question has remained pretty constant over the years: Is your product or service meeting a truly burning need for your customers? If your solution is 10 or 20 percent better than their current way of doing things, why would they switch? You need to be solving a burning issue and doing it in a way that’s 10 times better.
Which business sectors do you expect to provide the most fertile ground for startups in the coming year?
PRICE: This is more of an enabling technology than a business sector, but I’m excited to see what startups will be doing with artificial intelligence and machine learning in the coming year. These technologies are now mature enough to solve specific, vertical-industry problems. And the way the big tech players are making APIs available for their artificial-intelligence engines is opening up tremendous possibilities for third-party developers to come up with powerful solutions in a whole range of industries and applications.
Where else should hopeful entrepreneurs be focusing?
PRICE: When people ask me what I look for in terms of opportunities for starting a hot company, I always encourage them to consider niches. A niche is very powerful because it enables us as entrepreneurs to focus, to solve a specific customer set’s problems very well. And it allows us to avoid going up against the huge players in the first year or two of our startup.