Entrepreneurs should “stop worrying about prosperity and start thinking about survival,” says Jon Moulton, a leading venture capitalist.
Moulton, who founded private equity group Alchemy Partners says that the economy is “already in recession. I have no idea if I can raise money at all for a deal now. The limit on deals from banks is now only £20m.”
To survive now, he adds, CEOs need to be rigorous with keeping costs down and continually improving the business’s performance.
“Companies have the choice of doing nothing and probably going under or planning ahead and realising things will be bad for the next four to five years.”
Moulton isn’t relentlessly gloomy, noting that the downturn won’t be bad for all companies. “Cash-rich companies can eat the poor either in terms of business or customers.”
Those who experienced the last downturn will be the best equipped to handle the current one he says.
“If it weren’t against the law to discriminate in favour of someone’s age, I would advise choosing an older manager who has seen recessions before and is less likely to take risks. Right now you don’t want some lively youngster who is looking to grow the company.”
Speaking at an event in London, Moulton forecast that property-based lending on assets will shortly collapse: “This will happen with commercial property very shortly and will be hit in a big way.”
