Mar 20, 2023

The Tech Bubble Burst and the money drought in the tech industry

If you’re following the news, you’ve probably heard about the recent bubble burst in the technology world. More and more companies are coming out with having to fight this challenge and find ways to move forward. For those who understand that the days of buildup are behind us and that only stable and sustainable business models can remain viable, it will be easier to handle the process of change and eventually avoid the tech bubble burst.

What’s a tech bubble?

A tech bubble is described as an extreme and unsustainable increase in the value of tech stocks due to speculation. Thanks to the rapid growth of technology during the pandemic, companies within the industry were over-valuating tech startups and over-hiring staff without focusing on profitable business models.

Eventually, the bubble pop was inevitable.

The next step

One of the main challenges for investors now is the worthiness of acknowledging the valuations for tech companies. As money has become more expensive and more difficult to collect, the focus has shifted from growth to profitability.

For startups, this means building sustainable business models and resilience.

Tech companies are now focusing on profiting from generative artificial intelligence. By building strong machine learning systems for various purposes, many companies, such as OpenAI, have made big breakthroughs during the last year. However, they now have the challenge of preventing their systems from manipulating humans or sharing false information at scale.

Unfortunately, the bubble burst was only a matter of time. As the nature of growth is hard to control and sustain, it was inevitable for investors to realize that their high expectations won’t be met, which further had to result in a collective exit.

So, now what?

The most important thing for businesses caught up in the money drought to understand is profits over promises. The first thing to do is to re-evaluate the business model so that it can generate fast revenue and improve overall productivity both in the short and long run.

For investors, the most important metrics are now profitability and churn rates.

For businesses, this means delivering continuous value to their customers and building long-term relationships.

Our suggestion is that you consider starting with:

getting your business model right

focusing on operational efficiency

minimizing churn by value mapping

How do you re-evaluate the business model?

There are various tools and techniques which can be used for gaining a deep insight into your business condition. There are generally three essential elements in successful crisis management: preparedness, a fact-based strategy, and the effectiveness of all communication – that is, both internal and external. To make long-term decisions, you have to have a solid foundation.

A good understanding of your business can reduce the chances of failure and use the best advantage of what you already have to offer. 

Don’t know where to start? Check out our Business Health Assessment or get in touch with us to learn how we can help you overcome your business challenges.

Author: Mirela Halvadzija / Business and Marketing Consultant

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