This is the second entry about the Financial Crisis. As an Internet entrepreneur, I have some observations.
It Reminds us the Basics of Business
One of the key basic rule we noticed these days is: profit equals revenue minus cost.
This equation is obviously but was not paid attention to during booming times. When Internet investment is hot, people tend to think about revenue and cost this way:
Every dollar in revenue may result in 20 dollars in valuation of the company, and for that 1 dollar, many first-time-entrepreneurs and VCs are willing to spend 1.2 dollars to get, or even 18 dollars! That is the source of the crazy Internet bubble when people spend 18 dollars just to get 1 dollar – the sin of valuation.
Now, everyone gets back to basics. If you spend one dollar, and you cannot get 1.1 dollar back, why bother doing that?
Thanks for the Crisis
For the generation of China like myself, we were born in 1970s, and started to work in 1990s, we were lucky enough to get a job (pretty good one) after graduation. When we started to run business, we experienced the up turn and now the down turn. The contrast helped us to understand how to run business better. Without a down turn, an entrepreneur or a company does not grow up, and never becomes mature. It also provide golden time for profit making company to be stronger.
I’d like to see how this crisis change the world, and more interested to see what the world after the crisis looks like.