According to Margaret Chan, head of the World Health Organization (WHO), Ebola is “unquestionably the most severe acute public health emergency in modern times.” On the same day, Sierra Leone, with its tiny medical infrastructure overwhelmed, admitted defeat. The country officially abandoned efforts to treat Ebola, opting to hand out rehydration kits and painkillers instead.
Despite being less contagious than SARS, Ebola has already killed more people than the SARS epidemic. But most of the entrepreneurs I know downplay Ebola’s impact on them personally. To those doubters, I offer these thoughts, in terms they can relate to.viagra
Investors are already panicking.
As the drumbeat of doom and gloom amplifies, American markets will fall. Between ISIS and Ebola, CNN’s Fear & Greed Index indicates we’re already at extreme levels of fear. Fear has an incredibly powerful impact on the markets: in 2009 the Dow Jones Industrial average closed at 6226, losing more than half its value in the wake of widespread bank failures. The panic hit almost every listed company – not just financial ones.
After the stock market falls, VC investments shrink.
The stock market crashes of 2009 and 2011 both temporarily dampened Venture Capital investments (red circles in the chart above source). It’s harder to find data on Angel investors, but in my experience, most Angels have most of their cash in the stock market. When the market crashes they’re less likely to fund risky startups.
Ebola in Asia could be a catastrophe.
Even if the US can contain Ebola at home, failure to contain Ebola in Asia would be an economic disaster in the US, further fueling market fears. The US imports tiny amounts from West Africa ($42 million from Sierra Leone, $97 million from Liberia), so Sierra Leone is more humanitarian crisis than an immediate financial one (for the Americans). Meanwhile, the US imports $4.9 billion of garments from Bangladesh alone. Southeast Asia – Bangladesh, India and Pakistan in particular – with their overcrowded hospitals, vast slums with little running water, may suffer the same fate as Sierra Leone, taking major markets into a tailspin.
I go to Bangladesh every year. I regularly see impoverished people bathing in contaminated urban ponds. The medical system is okay for the hyper elite, but a disaster for almost everyone else. The capital city has open sewers lining the streets, and hygiene is almost impossible in the crowded slums. I cannot imagine how Bangladesh can hope to contain Ebola.
We can take action now.
Here are some things you can do as an online entrepreneur to survive a coming financial crisis:
- Focus on creating a real business with meaningful revenue (rather than an acquisition target).
- Assume your next round of fund raising will be harder and slower than in recent years. And this may remain the case for 6 months or longer, depending on the depth and severity of Ebola outbreak.
- Have personal savings. Don’t spend all your cash on your startup. If funded, pay yourself and save.
- Keep your options open. This might not be the best time to take on an expensive multi-year lease.
- If you need to raise capital, raise sooner than later. The stock market did very well since 2009, so angel investors are still feeling flush.
- Remain optimistic. It never pays to bet on the end of the world, and we can recover from even deep recessions. And even if we can’t, at least we as a species will be able to create new, better systems for a better future.
- Wash your hands frequently and encourage sick employees to stay home.
- Support efforts in West Africa to contain and fight the disease. Donate now to Doctors Without Borders.
Note: I wrote a similar piece in 2011 and VC funding did indeed temporarily slow in the two quarters after the market dip.