Will demographics change start-up investment?
There is a growing understanding that as baby-boomers retire,
western equity markets will be under pressure as this market
segment draws on their lifetime savings (Source: McKinsey April
2005). So what will this mean to start-ups that are
looking for new capital? Actually it is quite good news.
First off, as most US, Japanese and European investors are most
heavily into listed stocks and bonds, these will be the ones
most under pressure. One trend that is expected to offset this
withdrawal of funds is the increase in savings from the Chinese
and Indian middle classes. Will these new investors take the
place of the retiring ones? Time will only tell, but this
instability should cause institutional investors to think twice
about staying in most common equities.
Secondly, those remaining investors, faced with an uncertain (at
best) market in traditional vehicles, will look for high growth
opportunities to offset poor performance by established equities
and debt. Obviously emerging economies will be high on the list,
but foreign exposure will come into play as investors look to
get local high growth to reduce the exchange issues. Investments
in start-ups are net-new, and don