Business goes through ups and downs. In the last 10 years, we have seen dramatic financial volatility and at the same time constant progress in emerging countries like China and India.
2000-2002 were down times and 2008-2009 was another down and the biggest modern financial crisis in our lifetime. Government reacted rapidly to create liquidity, protect the economy and the financial markets, all this resulted in more than $10 trillion dollars of added new cash into the world financial markets.
While many develop economies are recuperating from it’s recessionary stage following the 2008-2009 downturn, emerging economies have been developing their own growth and during this timeframe, China economy moved from 4th in rank to the 2nd largest economy in the world by GDP, with the USA still number 1.
What strategies do we need now to navigate forward into 2012 and 2013?
We have to see what has happened 2010 and 2011.
A year ago, everything looked promising. Deal making was reviving both privately and the public markets rebounded, at least in the USA where the financial crisis started. And returns to investors, looked ready to continue their upward climb. By summer 2011, a sequential series of bad to worst news started in Western Europe which clearly had an effect in the confidence of businesses and the economic participants in the USA, This threw all investment activity into a reverse followed by a more wait-and-see attitude. By year end 2011, the upward climb ended like a ladder laying flat on the floor.
With the economic engine returns in stalled mode we enter 2012. However, the bright side is that there is nearly US$1 Trillion in available capital for investment and nearly an additional US$2 Trillion worth of good assets in the private funding alone.
The situation now is where capital abounds but good deals are few.
Under these scenario, incubating new emerging companies that can be cash generators in the future becomes a clear strategy.