Trending this month

Showing posts with label economic indicators. Show all posts
Showing posts with label economic indicators. Show all posts

September 9, 2011

The State of American Jobs : Who is Getting Them

THE global recession has hit young workers particularly hard. In the mostly rich countries of the OECD, the youth-unemployment rate (the unemployed as a proportion of the labour force aged 15-24) increased by 4.9 percentage points between 2007 and 2009, to 18.4%. By the second quarter of 2010 it had risen to 19.6%. Young people typically struggle to gain employment and are the first to be laid off; in nine countries more than one in four are now jobless. Spain has the highest youth-unemployment rate, at 42%, more than twice the unemployment rate of adults aged 25-54. In New Zealand, Sweden and Luxembourg, the youth-to-adult unemployment ratio is more than four. Germany has the lowest ratio (1.3), largely thanks to its successful apprenticeship system. The OECD warns that recovery will be slow and forecasts that youth unemployment will still be around 20% by the end of 2011.

March 20, 2011

The Bubble 2.0: How Soon Will It Strike

For the first time since 2000, internet and technology entrepreneurs can raise seed capital with little more than a half-formed idea and a dozen PowerPoint slides. “There is probably a bubble in the number of start-ups,” says Alan Patricof, a venture capitalist, though he is not yet convinced that there is irrational exuberance in later-stage valuations.
Yet valuations have certainly risen, especially for the leading firms in this latest, “social” phase of the digital revolution. Groupon, a two-year-old firm that offers group discounts to online consumers, reportedly turned down an offer potentially worth $6 billion from Google, prompting analysts to ask if Groupon’s founders had lost their coupons. A secondary-market auction of shares in Facebook in December had a minimum offer-price 77% higher than the price reportedly paid in a similar transaction three months earlier. Twitter is valued at $3.7 billion, up nearly fourfold in a year. The number of deals with (pre-investment) valuations of at least $100m is also increasing, according to Cooley, a law firm (see chart).

There are differences between today and the dotcom bubble of a decade ago. Then it was initial public offerings that were overpriced. Today, although the IPO market is reviving, it remains a shadow of its former self. Instead, the main way for the owners of a start-up to cash out is to sell their firm to a bigger one, such as Cisco, Google, Facebook or even Groupon. These tech-savvy firms ought to be less gullible than the stockmarket investors of 1999. But their owners may now be so wealthy that they care less about value for money than the coolness of owning the Next Big Thing.
The emergence of an active secondary market in shares of start-ups yet to go public has allowed founders and early investors in firms such as Facebook and Twitter to bank fortunes without waiting for a traditional exit by IPO or acquisition. These secondary-market prices feed hype about what these firms might be worth, were they to list on the stockmarket.
Then there is the growth in “angel” investing, by rich individuals and small funds that provide seed capital to start-ups too small to interest a venture-capital firm. These angels make many small investments (say, $100,000 a time), in a strategy critics call “spray and pray”. That could certainly account for a bubble in start-ups. One prominent angel, Chris Sacca, has reportedly paused his investing on the ground that valuations have become overblown.

Today’s entrepreneurs also have a deeper understanding of the industries they are trying to transform, says Nick Beim of Matrix Partners, a venture-capital firm. Fewer of them are engineers. More are “ambitious non-technologists with a business idea” to change industries such as media, advertising, financial services or fashion. These industries are concentrated in New York, which is why the new boom is as much in Manhattan’s Silicon Alley as in California’s Silicon Valley.
Mr Beim reckons this industry expertise will mean that start-ups in “social commerce”, where there is a clear revenue model from the start, are more likely to succeed than those in social media, where no one knows where the profits will come from even when millions use the service (eg, Twitter). Three of the leading social-commerce firms, Groupon, Gilt Groupe (a luxury-goods seller in which Matrix has invested) and Zynga (a social-gaming firm), are increasing their revenues faster than any start-ups in history, says Mr Beim. That is why this time may be different. Of course they say that during every bubble. 

Source : Economist

February 26, 2011

January 29, 2011