We are heading into the debt crisis and crypto can help
The global financial crisis and its aftermath have had a major impact on digital-first startups. Global finance is entering a great debt reset. More debts are created faster than any nation-made credit. How can this sustain growth in the future?
The stunning success of Facebook, Google, and other smartphone platforms has driven startups to abandon traditional marketing and digital platforms in favor of their respective digital-first businesses in the late 90s. Money is no longer tight for early-stage digital companies, which means they need to scale up their product and service offerings quickly. They also need to have access to capital sources that are cheap but reliable. That’s why crypto is so great. It can help drive startups back into business after the Great Financial Crisis, enabling them to continue operating without fear of being left with nothing left to do - or with access to capital that is cheap but reliable. However, multiple financial crises wipe out more capital than ever.
Why global debts are so high?
One of the main reasons digital startups can scale up quickly is the relatively cheap funding available at early stage. Back in 2014, when Facebook was just starting its business, it received stock options in exchange for development funding of $100,000. So while some early stage ventures may have received up to $1 million, most startups would only ever expect to get a few hundred thousand dollars. This funding is typically distributed in stages, with the early investor giving the majority of the funding to the generalists, who can then invest their own money and profit from the company. Then unicorns are all over the place with billions of dollars poured. People borrowed money to chase more money without even thinking about sustainable growth. Uber is one of the examples that too big to fail, which costs billions per year without any profits for more than five years. In the last decade, money has become too cheap to burn up and too easy to borrow.
How crypto can help
Some cryptocurrencies like Bitcoin have no issuers. Therefore, it forces investors to spend equal money to acquire crypto. It discourages borrowing more money to chase too few. As a result, it can substantially reduce debts. Also, the reward of holding crypto can be unlimited for investors. Since cryptocurrencies are made up of mostly private information, it’s easier for businesses to track and trace money directly back to its owner. This kind of data is known as traceability and is essential for law enforcement and financial regulation. If startups issue their own crypto, they will bear with huge risks of managing their own finance without jeopardizing their future and reputation. It is a good way to keep their reputation in check while minimizing the risks of debts in the entire economy.
Benefits of digital capital
Digital capital is the money that goes into building and developing businesses. The growth of digital businesses is sparked by the need for new communication and financing methods. For example, ecommerce websites use online banking to pay for products and set up online purchases. Apps for financial services use digital signing to increase transparency, reduce paperwork and improve customer satisfaction.
The idea of digital capital is more lean compared to physical capital. It benefits to the environment and helps business to grow rather than faking their growth through property valuation organically.
The financial crisis and its aftermath: lessons for startups
As the global financial crisis has revealed, many startups are still struggling to deal with the consequences of their decision to go public. As a result, many cannot scale up their business operations quickly enough to avoid going into debt or being left with nothing left to do. Most of the money going into startups during the crisis was likely to already successful startups. With so little money to go around, most of the startups would have made do with more limited resources. Investor money can be a great source of financing for early stage startups, but it’s also a great opportunity to start your own business and make a significant gain. By providing access to capital that is cheap but reliable, and by leveraging the expertise of nimble early stage startups, you can access a new source of financing that can help you scale up your business and expand your reach.
Using crypto for investment can be a good way during a financial crisis. Crypto is cheap during the market's downturn, and it offers great upside potential to help startups grow in the future and keep the debt lower without being influenced by the interest rate. It is the way of future startup finance.
Key takeaway
The financial crisis and its aftermath have shown us that technology platforms can be just as important for startups to scale up their business operations quickly enough to avoid being too early to market. Launching a new digital service or product requires a lot of upfront capital. You need access to capital that is cheap but reliable. You need the flexibility to scale up your business operations quickly enough to avoid being too early to market. And you need the flexibility to bring in outside investment once you’ve developed a product or service that’s ready for the market. Digital capital can help you scale up your business operations quickly and easily. But you need access to cheap, reliable capital that allows you to scale up your business operations quickly. Cryptocurrencies can be the future to help finance startups. They give startup upside growth of the fund in the future while allowing the company to grow in the short term. You can get there through the link that leads to the investment you need, and you can also get there through the links that take you to companies that provide capital and financial products to help you scale up your business operations quickly.
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Photo by Ante Hamersmit on Unsplash